Help to buy loan dismay

brownfox65

I really wish this information had been available when we bought our house in 2008, at that time just after the market crash, it was nearly impossible to get a mortgage. The only option we had at that time was to use a similar help to buy scheme. As it was explained, the housing company would pay the 30% deposit as an interest only type loan, we would then pay it back either when we sold the house or at the end of the mortgage term. Due to my husbands age, we could only have a 20yr mortgage rather than the normal 25yr term.
What wasn’t clear was that the amount payable would be linked to the value of the house, we have made improvements to the house (it hadn’t been touched since the 1980’s) which will have added value to the house and obviously house prices are significantly different to those in 2008. We are 6 years from finishing the mortgage and my husband will be of retirement age at that time.

I recently contacted the housing company to confirm the amount we would need to repay, they explained that it would be 30% of the CURRENT valuation, I was completely shocked.

We love our home but we will have to sell our house and move somewhere smaller as we simply don’t have the minimum £76,000 to pay the loan back and our mortgage lender is unlikely to approve an extension of our mortgage due to my husbands age. 

Completely devastated.

chanz4

It would of been in the contract signed?

GDB2222

"What wasn’t clear was that the amount payable would be linked to the value of the house, we have made improvements to the house (it hadn’t been touched since the 1980’s) which will have added value "

Is there really no allowance for the improvements you have made?  Perhaps, you could say exactly which scheme you got this loan from, and maybe somebody here can help you.  

Hoenir

Was the loan provided interest free? 

silvercar

Here are the details of the old scheme, that would have been available in 2008:

https://publications.parliament.uk/pa/cm200809/cmselect/cmcomloc/101/101we41.htm

Note: "Purchasers are free to re-mortgage at any time but will need the equity loan provider's consent if the loan is still in place." So you could re-mortgage if you were able to, I think some lenders will go up to age 70 for those in desk jobs and the like.

silvercar

The general rule is that you need to get permission from your HTB operator to make improvements, the advice is usually to buy out the HTB loan before spending money on improvements.

lika_86

Was it not clear or did you not take the time to fully understand what you were signing up for? Lots of people sign up to schemes like this because they sound like a great idea on the surface but then fail to actual do their due diligence. Taking on a mortgage or any large loan is a big undertaking and far too many people take it lightly.

bobster2

brownfox65 said:

I recently contacted the housing company to confirm the amount we would need to repay, they explained that it would be 30% of the CURRENT valuation, I was completely shocked.

We love our home but we will have to sell our house and move somewhere smaller as we simply don’t have the minimum £76,000 to pay the loan back and our mortgage lender is unlikely to approve an extension of our mortgage due to my husbands age. 

Completely devastated.

This page is from 2010 but I assume a similar version would have been available in 2008...

https://www.gov.uk/government/publications/homebuy-direct/homebuy-direct-buyers-guide-accessible-version

The Agency and the housebuilder will provide equal equity loans to fund the balance needed to make up the full purchase price of your home, up to a maximum of 30% of the full purchase price. These equity loans must be repaid when you sell your home, at which point you must repay the same percentage of the proceeds of the sale to the Agency and the housebuilder as the initial equity loans (i.e. if you received equity loans for 30% of the purchase price of your home, you must repay 30% of the proceeds of the sale).

lika_86

OP, are you sure it has to be repaid at the end of the mortgage term? In the guidance out there it only seems to reference repayment when the house is sold.

_Penny_Dreadful

brownfox65 said:

I really wish this information had been available when we bought our house in 2008, at that time just after the market crash, it was nearly impossible to get a mortgage. The only option we had at that time was to use a similar help to buy scheme. As it was explained, the housing company would pay the 30% deposit as an interest only type loan, we would then pay it back either when we sold the house or at the end of the mortgage term. Due to my husbands age, we could only have a 20yr mortgage rather than the normal 25yr term.
What wasn’t clear was that the amount payable would be linked to the value of the house, we have made improvements to the house (it hadn’t been touched since the 1980’s) which will have added value to the house and obviously house prices are significantly different to those in 2008. We are 6 years from finishing the mortgage and my husband will be of retirement age at that time.

I recently contacted the housing company to confirm the amount we would need to repay, they explained that it would be 30% of the CURRENT valuation, I was completely shocked.

We love our home but we will have to sell our house and move somewhere smaller as we simply don’t have the minimum £76,000 to pay the loan back and our mortgage lender is unlikely to approve an extension of our mortgage due to my husbands age. 

Completely devastated.

The fact the loan was expressed as a % and not a fixed amount is a bit of a giveaway. 

What improvements have you made that you think has added value over and above HPI? 

bobster2

lika_86 said:

OP, are you sure it has to be repaid at the end of the mortgage term? In the guidance out there it only seems to reference repayment when the house is sold.

Yes - the guidance I posted says "repaid when you sell your home". So not sure why the OP thinks they need to sell??