Are there downsides to Help to Buy?
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Moneyconcious
Posts: 3 Newbie
Hi, am after some advice/reassurance....
My partner and I were wanting to use help to buy to purchase a property at the max of £600k. We have a £105k deposit, was going to take the max 20% equity loan with payments of around £1650 (for the 5 years, after which they’d increase as the discounted mortgage and the interest free period ends)
However the plot we had our heart set on has now been released and is not eligible for help to buy 😫. The £495k mortgage is £2110 a month (5 year fixed) - nearly £500 more than it would be if help to buy applied 😲
It’s making us think twice and we are considering either moving to a different development (but lwould be onger commute, 70min each way instead of 50) or to a smaller but lower price (£500k) 2nd hand house in the same area
Or are there downsides to help to buy that would make us feel better about paying £500 a month more??! We can afford the higher payments but just feel a bit miffed like we might be overpaying?
Ps the property is in St Albans, not sure we can bank on prices going up too much more esp with brexit?
Thanks!
My partner and I were wanting to use help to buy to purchase a property at the max of £600k. We have a £105k deposit, was going to take the max 20% equity loan with payments of around £1650 (for the 5 years, after which they’d increase as the discounted mortgage and the interest free period ends)
However the plot we had our heart set on has now been released and is not eligible for help to buy 😫. The £495k mortgage is £2110 a month (5 year fixed) - nearly £500 more than it would be if help to buy applied 😲
It’s making us think twice and we are considering either moving to a different development (but lwould be onger commute, 70min each way instead of 50) or to a smaller but lower price (£500k) 2nd hand house in the same area
Or are there downsides to help to buy that would make us feel better about paying £500 a month more??! We can afford the higher payments but just feel a bit miffed like we might be overpaying?
Ps the property is in St Albans, not sure we can bank on prices going up too much more esp with brexit?
Thanks!
What should we do 7 votes
Buy the house anyway & suck up higher mortgage
28%
2 votes
Move further out to another help to buy house
14%
1 vote
Move to cheaper 2nd hand house in same area
57%
4 votes
0
Comments
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If you believe prices in St Albans will rise, the final costs of buying out the equity loan can far outstrip the extra interest costs of full purchase today.I am a Mortgage Broker
You should note that this site doesn't check my status as a Mortgage Broker, 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.0 -
If you can afford the higher payments, I would choose non-help to buy over taking the equity loan any day. And we have it, and are happy, but in our situation, it was necessary.
5 years interest free is great, but it is an equity loan, and if you're not selling and want to pay it off at some point, then you're going to have to pay for the valuation, the conveyancing and then 20% of whatever your house price is at that time. It's really hard to budget for (who knows what's going to happen with house prices in 5 years time?) and when the 5 years are up, if you're not paying it off, you're only paying off the interest on it. Better to own outright with just the mortgage, much easier to know where you stand.0 -
Some think that help to buy eligible properties are over priced, precisely because people can use HTB to buy them.I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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I take it you've tried haggling with the developers? At the very least, I'd be asking them to include extras which are not standard - ours didn't come with flooring for example, so we asked for that and a few other things to be included in the price.0
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Some think that help to buy eligible properties are over priced, precisely because people can use HTB to buy them.
Which presumably means a loss when it comes to selling (relative to house prices in the area). Help to buy has benefitted house builders wonderfully, with senior staff getting fabulous bonuses. I'm not so sure it's helping buyers.No reliance should be placed on the above! Absolutely none, do you hear?0 -
Simple number crunch to work out how much prices have to go up to negate the benefits of better rates on 75% and interest free on 20%0
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Yes, tried haggling them down to £600k but they wouldn’t so we’ve met in the middle & with a tiny discount. They weren’t willing to chuck in carpets or stamp duty either as the plots have been selling well and seem to be priced in line with other 4 bed places in the area at the moment, though who is to say they will sell for the asking price? That said it’s close to good schools & commuterable into London so should hold its value despite brexit. The ones further out however are where there are good deals to be done on price & incentives, but are an extra 20-30 min commute each way everyday0
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50 minute commute each way is madness! Isn't there anywhere closer?0
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I agree it's not for everyone, but it has definitely helped me a great deal.Which presumably means a loss when it comes to selling (relative to house prices in the area). Help to buy has benefitted house builders wonderfully, with senior staff getting fabulous bonuses. I'm not so sure it's helping buyers.
Instead of !!!!ing away £10'000s on rent, or taking a massive downgrade in size and/or location, for "old build", I'm slowly but steadily building up equity in my own home and don't have to fear random s21 eviction at LLs whim.
The value drop due to "new build premium" is less impactfull especially in London with 40% EL which partially shields you from value drops.
Hands down if you can get and afford the mortgage without HTB EL DO NOT GET it. The 5 years interest free period is not worth the hassle and expense around redemption. If the property value goes up you will likely end up repaying more than equivalent mortgage. Remember that most of the extra £500 will go towards repayment of the mortgage and building up equity. If you have plans to remain in the property long terms you will have to save similar amount to redeem the EL eventually.0
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