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lowmiles
Posts: 87 Forumite
Hi All,
currently looking to second step from 350k house to a 450k house. We have been on the market a few months and have viewed a few new builds. The agent (how helpful of them) said we should consider a 500K house with help buy. Having looked the guidance on the interest rates it looks a shocking deal if you can't pay it off in the first 5 years:
https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-scheme-everything-you-need-to-know
Interest rates for paying back your loan
Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + RPI + 1%
These fees do not go towards paying off the government loan.
So using my example if I took the max loan 20% 100K and RPI remained the same:
Year 1-5 : no fees
year 6: 1.75% = £1750 = £145 per month.
year 7: 1.75 + RPI (current 3.6)+ 1 = 6.35% = £6350 = £529 per month
Considering most people would use this scheme to get on the housing market as they can't afford a big mortgage it seems crazy to give them house and then charge them a much higher interest rate that most mortgages after 5 years. It seems to defeat the whole purpose of the scheme and would only work if people can pay back the loan within the 5 years in which case they don't need the scheme in the first place.
I wonder how many people have bought this way and are sleep walking into potential bankruptcy. I certainly won't be taking one out.
currently looking to second step from 350k house to a 450k house. We have been on the market a few months and have viewed a few new builds. The agent (how helpful of them) said we should consider a 500K house with help buy. Having looked the guidance on the interest rates it looks a shocking deal if you can't pay it off in the first 5 years:
https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-scheme-everything-you-need-to-know
Interest rates for paying back your loan
Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + RPI + 1%
These fees do not go towards paying off the government loan.
So using my example if I took the max loan 20% 100K and RPI remained the same:
Year 1-5 : no fees
year 6: 1.75% = £1750 = £145 per month.
year 7: 1.75 + RPI (current 3.6)+ 1 = 6.35% = £6350 = £529 per month
Considering most people would use this scheme to get on the housing market as they can't afford a big mortgage it seems crazy to give them house and then charge them a much higher interest rate that most mortgages after 5 years. It seems to defeat the whole purpose of the scheme and would only work if people can pay back the loan within the 5 years in which case they don't need the scheme in the first place.
I wonder how many people have bought this way and are sleep walking into potential bankruptcy. I certainly won't be taking one out.
0
Comments
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I think it's RPI +1 percent in year seven but that is still 4.6 percent as of today.
With luck most people will have paid down some of the mortgage in the first 5/6 years and will then be able to remortgage with a lender the mortgage outstanding and the HTB loan.0 -
If you assume inflation runs at 5% per annum, the rates are 1.75% in year six, 1.86% in year seven, 1.97% in year eight, 2.08% in year nine and so on.
See page 20 of the Buyer's Guide.
https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdfI am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
kingstreet wrote: »If you assume inflation runs at 5% per annum, the rates are 1.75% in year six, 1.86% in year seven, 1.97% in year eight, 2.08% in year nine and so on.
See page of the Buyer's Guide.
https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdf
thanks so the RPI is added to the rate rather than the loan? Not clear at all from the link above I posted but is from your link0 -
Always better from the horse's mouth. The maths;-
1.75 x 6% = 0.105.
1.75% + 0.105 = 1.855 rounded up to 1.86(%).I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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