Help to Buy/ Other Government ''Help'' schemes confusion

[Remieatscake]

Hello all,

I am so confused by the Government schemes for first time buyers to get on the property ladder - they all seem like a scam (!) and/or totally achievable

For context my fiance and I have £40k deposit. We are looking in SE London/Kent - up to Dartford area

I looked around a gorgeous 2 bed flat which was in the Help to Buy scheme

So we would put down 5% deposit
We would get an interest free loan for 5 years from the government to cover 40% and then our mortgage would cover the rest

BUT WHAT THE CHUFF HAPPENS HAPPENS AFTER 5 YEARS!
Obviously we would have to start paying this loan back to the government at some point but also obviously we would still have a mortgage to pay after 5 years so how on earth are you meant to cover essentially 2 mortgage payments?
Can anyone shred any light on this? The only way I can see this scheme potentially helping anyone is if they are on a very defined career progression programme where they know in 5 years time they will be earning a lot more ??!! Sadly not the case for my fiance or myself

The other scheme were you buy 30% of a property and rent the rest.....but what happens when the boiler breaks? The people who only own 30% of the property has to pay 100% of the costs??!

The more I look into them they look like scams - the government propping up the property market?
Can anyone make any sense out of it for me. Apologies if my post is confusing - it is because I am confused

If its needed for context. My fiance is 44, earns about £17k a year and I am 29 and earn £26.5k a year so not huge earners but do at least have a decent ish deposit

Thank you

I honestly don’t know, I have thought about it myself. But no way will I do it. I don’t like the idea of buying a % and renting the other half. Maybe Im wrong but if you have £40k just buy your own house out right you’ll be better off

Thank you @Everything

In a way it's a relief I'm not the only one confused - I thought I was missing something really obvious.

I get the feeling that if we went into the buying a % scheme then we could be trapped into renting part of our home forever.

I have just spoken to one of my colleagues now and he said that another disadvantage of the shared ownership scheme is that the rent varies every month according to market variables!! So, what - one month you could be paying £300 rent, the next £400?
I don't know why there isn't more fuss being kicked up about this to be honest

Hey, it does look really appealing in my area you can buy a 40% share of a 3 bed house for £75k which sounds good but the average price for a 3 bed house in my area is £130K so I’m paying nearly £160k for a standard 3 bed which is £30k more

Oh wow so if they can adjust the rent so easily perhaps they can adjust how much they want you to pay for the other 60%? Perhaps if the cost of houses goes up they can demand more? Plus if you don’t buy the other % on the house i worry about being able to sell it. Maybe we’ve both missed something lol, but with your deposit, shop around and buy yourself a lovely new home...all100% of it haha!! Don’t get ripped off by paying so much more £££ than the average home x

HTB - yes you have to pay it back. It isn’t free money and is effectively a second mortgage. Ideally property prices will have continued to rise allowing you enough equity to remortgage and redeem your htb loan.

Shared ownership - generally you’ll maintain the house.

They’re not scams. You don’t get something for nothing!

Shared ownership you are able to market both the share you own and 100% on sale.

@Foxmuffin - thank you for shredding a little more light on the matter!

So do you think after 5 years you would be able to release some of the equity in the flat/house so to pay off at leas some of the 40% loan from the government?

I suppose that does make a little more sense

We shelving the idea of buying right now as the wedding is exactly six months away!..And we want to see what happens with the joy of the dreaded (B)rexit word

@Everything - yes I think we will try our hardest just to go down the traditional route of buying 100% of a property if at all possible :)

Shared Owner here. When you buy a share the rent is set so that you pay a percentage of the total rent value based on the percent you do not own. So I own 50% of a property worth £360000. My rent is 50% of the rental value ~£450pcm. It increases based on some obscure calculation based on the rpi. It worked out at 5% this FY. It's steep and we're complaining since some people are priced out after several years. I only recommend shared ownership where 1. You have career progression to buy the rest of the property or sell and get a full property with mortgage. 2. You must be in a high demand area where prices are sky high (SE and London) so you can sell on. Yes you are responsible for 100% of maintenance so I wouldn't go for less than 50% share. You must make sure it is the right path for you.

DO NOT GO SHARED OWNERSHIP IF YOU DO NOT HAVE A PATH TO 100% OWNERSHIP.

For me rent + mortgage is less than private rent of a same size property. I'm early in career and have a career path that in a few years I will be in a position to get a mortgage on a full property and move on or buy my house out right.

When yousell a shared ownership the housing association has 6 weeks to sell it as a shared ownership. After that you put the property onto the open market and can be bought outright.

The HTB loan is again for people that can either repay (start paying off asap before the interest kicks in, effectively like a 2nd mortgage) or you don't pay it off and sell the property so that they take the loan value from the sale. Hopefully by that point you will have got equity + savings as a deposit on your next property so you do not need the loan.

Yes the HTB loan is propping up the new build premium and I think a lot of people are going to be stung once their 5 years is up.

@ - LoopyLu2019
So helpful, thank you x a million - really glad I started this thread

For the help to buy scheme I think it is only useful if you will move before the 5 years is up and then the government take their share back and hopefully it will have increased in value so that you will then have a big enough deposite to buy a property without the scheme. Hope that makes sense. That's what 2 of my friends have done.

Yellowcar2 - Yes that does make sense - I suppose there is a big chance we would move in 5 years time, not many people choose to stay in the first place they bought do they?
Neither of us are originally from SE London, where we look to buy so that is why there is a high chance of us moving elsewhere after 5 years.

In that way it does look like it could be used as a good springboard into owning a property if used in the right way

We're help to buy, 2 years in. We paid 5%, HTB 20% so mortgage 75% of total sale price.

At the end of 5 years we either pay back 20%, pay interest on the loan (approx £50 pm at the mo) or move and clear it that way. Be aware though that the 20% is a fluid figure. You always owe 20% of the current value, NOT what you paid. Ours has gone up in value so the figure has gone up but relative to total equity. I guess it works the same if the value drops but that's quite unlikely in most areas.

Good point @Lauzy - I hadn't thought of that x