London 'Help to Buy' scheme...anyone bought using this?

[TurquoiseDress]

Have been researching Help to Buy recently, we live in London and have been reading about the most recent scheme.

From what I see you can get up to 40% government loan which is interest free for the first 5 years. Then you get a mortgage on the remaining amount- minus 5% deposit. The property must be a new build, up to £600,000

Just been looking for properties- we're looking to buy in SE London and this one of the developments I've found.

In a place called West Wickham (zone 5) which I only know a little bit about.
www.rightmove.co.uk/new-homes-for-sale/property-42830226.html

Has anyone successfully purchased via this scheme? There are some benefits- like having stamp duty & legal fees paid, but moreover I'd be concerned with paying a mortgage & (potentially) a 200k government loan back each month.

Also, can't help feeling it's a scheme to prop up the construction industry rather than primarily to help desperate FTBs.

What do others think?

[alazuli]

i briefly looked into this but then i realised how much debt i'd potentially be taking on and it was terrifying. sure it's interest free for 5 years but you still have to pay it back. also the government loan goes up or down depending on the value of your home. i actually think it's irresponsible to be encouraging people to take on so much debt. in today's economic climate i'd steer well clear.

[whois]

I too briefly looked into this but was advised if you can posisble buy at all without this, then to do so.

Basically - how will you be in a position to start repaying the 40% equity loan in 5 years time?

Also the govt essentially has a stake in your house and the equity loan is sized to the market value - so if value goes up by 10% you have to repay loan + 10%..... eek.

[cestlavielife]

if you planning to sell before five years it might work out...
Market Price: £435,000
60% Equity Loan Price: £261,000 if you on 95% mortgage then
essentially you renting from mortgage provider/govt -
bearing in mind that you potentially wont make much equity on it possibly only what you've paid off of the equity if prices remain the same over five years. if they go up what you pay back goes up to (remains at 40% of price). or if prices goes up to say 500 then you would pay back 200 in the loan (40%) and you would have profit of 300k - 261. some 40k. if prices do continue to rise then would you be able to move on to bigger property if you need? does that matter?

but f you like the flat and the area and intend to sell before you start paying interest might be worth it ?
if you plan to stay say 10 years then how would you pay back the huge govt loan?

[cestlavielife]

go and spend a weekend hanging out in west wickham see how you like the area. what if you have kids? 2 bed flat ok? schools? parks?

[Betty4321]

The scheme is just there to allow builders to keep prices inflatted, its deeply irresponsible putting the buyer at huge risk along with tax payer money.

Ask yourself;
What happens if London house prices continue to fall?
How will you repay the huge government loan and mortgage after 5 years especially if interest rates go up?
How will you remortgage?
Do you really expect your equity to rise despite in genral wages not really going up?

Be really careful and do your research. Personally I wouldn't wish help to buy on my worst enemies.

PS The builders would love you to buy into the scheme but not for your good but theirs.

[Lemansky]

We did the earlier version of this called Firstbuy. It was good in the sense that it allowed us to get on the property ladder. But we sold at the end of last year, so 4 years after we brought it as we didn't want to start doing the loan repayments along with the mortgage.

We would never have been able to buy without it, but on the other hand I'm so glad we've sold it so we don't have to worry about the repayment side of things.

We would never have been able to staircase any payments as the properties just increased so much in value - the initial loan was doubled I think by the time we moved. You have to pay the loan back at the current market rate if it's higher than when you brought. If it's lower, you would have to pay back what was originally loaned, not anything less.

It's not something I'd risk doing now, not while there's all the uncertainty about the house prices.

[sall74]

A more accurate title for it should be "Help Builders To Sell Overpriced Newbuilds" scheme.

[specialsubject]

Indeed. The emphasis should be on getting empty properties into use by renovation and updating. Older places are built better and better located. I'm all for handy shops , but living on top of lidl???

[TurquoiseDress]

Thank you for all the replies everyone- some of the things you've written about have put into words & context my concerns.

We have a 2 year old so really we'd be looking for something bigger but at this point all we can really afford in SE London are 2 bed flats.

A bit depressing with both of us working FT in fairly ok jobs.

We've been thinking it over a lot- buying a 2 bed flat won't meet our needs very soon in the future but we've reasoned that at least by buying something we get out of the rental trap.

Ideally we'd like a 2 or 3 bed house but ha yes so would everyone else!

It's the associated costs of buying that I'm just starting to comprehend- stamp duty, solicitors fees

The thought of having to pay out all over again a few short years down the line made me shudder

[TurquoiseDress]

'specialsubject' yes I had a closer look at the photos & the flats are all above a Lidl!

Wonder if there would be another £50k on the price if it was a Waitrose or M&S?!

[QforCucumber]

Not in London but have bought on help to buy scheme elsewhere. 5% deposit, 20% govt loan, 75% mortgage. We have been overpaying the mortgage so at the 5 years we will remortgage to pay back the govt loan. Annoying thing is that you have to instruct a valuer to give the value when you want to repay so another cost to you too.

[whois]

A more accurate title for it should be "Help Builders To Sell Overpriced Newbuilds" scheme.

Lol. Agreed.

[cestlavielife]

there seems to be a park nearby so would be ok with one toddler...but what about storage ? are there storage lockers available? chidcare nearby? schools?

[TurquoiseDress]

Funnily enough, a work colleague of mine grew up in West Wickham.

She describes it as a quiet, villagey place that she couldn't wait to escape from as a teenager, but concedes that it would be a rather nice place to bring up children when she has them.

She nearly wet herself when I showed her the new development- I don't think she could get over the fact that 2 bedroom flats in zone 5 West Wickham were going for nearly half a million pounds!