How does Help To Buy work?

Essential1

I have a full time job working 5 days a week my income is around £1500 and when pubs reopen I will able to make another £200 a month on top of that. I live in west london and my goal is to move out of my parents and have a decent flat, nothing mind-blowing but something I can be proud of and that is affordable. I don't have a clue what to do but I'm saving for a deposit, I heard about Help To Buy and Shared Ownership...what are the differences? I heard Help To Buy you only pay for mortgage and not rent what's the deal? how does it work would it suit my situation?

grumiofoundation

If you are saving for a deposit have you looked at lifetime ISA? However (big however) can only use for a property purchase of £450,000 or less - which may be a limitation for you if you are in london.
https://www.moneysavingexpert.com/savings/lifetime-isas/

Help to buy equity loan you get a loan for part of the property (up to 40% in London, 20% elsewhere). This loan is interest free for the first 5 years, then you pay ~ 1.75% on it. 
When you pay it off you pay back 40% (assuming you borrowed 40%) of the current value not the amount you borrowed.
https://www.helptobuy.gov.uk/equity-loan/equity-loans/

Shared ownership you buy a share of the home and pay rent on the rest. 
https://www.gov.uk/affordable-home-ownership-schemes/shared-ownership-scheme

Essential1

Do you think they will accept me with my income? I'm looking for a flat maybe 1 or 2 bedroom. I'm looking to save for a deposit for a year or two.

rachlikeswinter

Essential1 said:

Do you think they will accept me with my income? I'm looking for a flat maybe 1 or 2 bedroom. I'm looking to save for a deposit for a year or two.

It all comes down to what a mortgage lender will offer you. As a VERY general rule of thumb, you can expect to be lent 4 - 4.5x your income. You don't say what your gross salary is but if you take home £1700 a month, by my napkin calculations you earn around £25k. That means you can expect to achieve a mortgage of around £100-120k.

You won't get anything within the M25 for that. But, Shared Ownership could be a solution for you though - although shared ownership mortgages tend to lend slightly lower amounts. You will need a minimum of £10k saved, I would estimate, for a 10% deposit (yes, shared ownership can be done with 5% deposit but you need solicitors fees, and frankly, the more you save the better.) Please read and research into shared ownership as much as possible and if it's right for you.

Help to Buy is probably not going to be useful for you; still too expensive within the London area. Caveat: There are many excellent mortgage brokers on this forum which can give better info than I can (I am not a broker - I am a FTB buying a Shared Ownership property in London.)

My advice - boost your income/salary, if possible - I appreciate not easy right now. Save save save. It is an achievable dream; perhaps not in the area you desire. Keep your credit report squeaky clean. Consider moving further out to be able to afford something bigger than a shoebox. You can do it!

FTB_Help

Essential1 said:

Do you think they will accept me with my income? I'm looking for a flat maybe 1 or 2 bedroom. I'm looking to save for a deposit for a year or two.

Sorry to burst your bubble but you will need to save longer than a yr or 2.

I started saving at 22/23 and 9 yrs later i have a large deposit and now in the middle of buying in London.

What area are you looking to buy in? i know London very well and could give you some areas to have a look at to give you an idea of what you could afford. And what to look forward to/ a goal to work towards.

As previous poster mentioned, max mortgage offered will be about 4.5x your wages, so if you earn 25k @ 4.5 = 113k.

Most lenders request atleast 10% right now, so working on the basis that 113k is 90%, you'll need atleast 12.5k for a flat costing 125k.

But if you use help to buy/SO then you will be able to afford to get something more than 125k.

My advice is keep saving, most people are very pessimistic and think they'll be able to buy after 2 yrs of saving but reality is harsh esp if you dont have bank of mum and dad.

Every little helps, so just keep squirrelling away your small change it will make a big difference

Essential1

Only thing is I hear with shared ownership you pay rent and mortgage too me that seems a hell of a lot. Anything that can get me something a bit more than a "shoebox" would be nice, something I can move about in I'm a tall guy. Something I can be proud of. My credit report should be pretty good paid of a car finance many years ago now. I would like something close to West London really. If not Watford area as my weekend job is based around there. I've heard peers of my being able to do this but know one has told me the secrets. I've got almost 12 k saved up now already. I'm taking home just £1500 now but when the pubs are open will have my weekend job to top things up. What should my first step be? ring a mortgage advisor...will the be the one finding the property for him or is that someone else?

FTB_Help

Yes correct SO pay rent and mortgage, which is why some people will avoid, but most rely on SO as they don't earn enough to buy.

This one in uxbridge 25% share:

https://www.rightmove.co.uk/properties/77446020#/

Harrow 50% share

https://www.rightmove.co.uk/properties/68822610#/

Both within your budget

Help to buy - can get help with deposit upto 40% by taking out a loan, int free for first 5yrs i think, 40% of the sale will be repayble when you sell so could end up paying more back, i think its only on new builds.

Personally, i would try and save some more, maybe try and get to around 30k saved up and in a few years hopfully your wages will increase and you should be able to buy a flat for around 180k mark thats not h2b or SO

[Deleted User]

@Essential1 is your salary likely to increase (a lot) in the future? Even if you include your income from working in a pub then you still earn below the national average whilst aiming to buy a property in the most expensive city in the uk.  If your salary is unlikely to increase and you’re hell bent on remaining in London then I suspect SO is the most realistic route to home ownership but please do your research as SO isn’t without its pitfalls.  

Essential1

I doubt the salary will increase. Annoying as I work hard and 45-55 hours a week then hear someone else doing less or no hours and getting a flat paid for buy the goverment. I'm a bit worried what would happen when my parents are no longer about. I would like to support myself and have a place where I'm not sharing with anyone. I know some people who just rent, nothing fancy but it suits them. I feel I wouldn't even reach the affordability.

[Deleted User]

Essential1 said:

I doubt the salary will increase. Annoying as I work hard and 45-55 hours a week then hear someone else doing less or no hours and getting a flat paid for buy the goverment. I'm a bit worried what would happen when my parents are no longer about. I would like to support myself and have a place where I'm not sharing with anyone. I know some people who just rent, nothing fancy but it suits them. I feel I wouldn't even reach the affordability.

How is the government paying for the property? HTB EL is just a loan secured against the property eventually it has to be repaid. 

badger09

I suspect OP means people who either do not work at all or who work very few hours in receipt of Housing Benefit.
Could be wrong though.