Help to Buy scheme

[Coffeemonster1]

We are looking in to this scheme to buy our first house but there is one thing we don't understand.

As an example, say we bought a house at £100,000, we had a deposit of £5000 and the government gave us the 20% loan of £20,000. Then got the 75% in a mortgage. When we sell the house we have to pay the 20,000 back out the sale of the house.

Imagine the house sold for the same amount to make it easier.
Now say we had paid £30,000 off the mortgage this would be our equity right? So does the £20,000 we need to pay back, come out the total sale amount of the house or do we have to pay it back out the 30,000 equity which would leave us with £10,000 to put towards another house? We're really confused :(

You can borrow up to £120000 which is only interest free for five years. Move or not it had to be paid off like a loan as far as I am aware.

Yes its a loan so the 20k would have to be repaid when you sell the house.

You repay the same percentage when you sell as when you bought (ie if house prices rise Govt wants a share of the uplift when you sell).

Its only interest free for the 1st 5 years so you have to start paying fees on the 20k after 5 years as well as paying back the percentage of the help to buy stake in the property when you sell.

Google help to buy buyers guide which explains it all with examples.

Sorry I didn't answer your question, when you come to sell the solicitor would deduct what was owing to the mortgage company as the first charge lender, deduct what was owing on the help to buy loan and what is left after fees etc is yours

Brilliant thanks for clearing that up. Think it makes a bit more sense now. Does anyone know what the interest rates are like on the loan? And is it something worth doing. We originally wanted shred ownership but a few estate agents have advised us, this scheme would be better and we could get a better house this way....

It's 1.75% annual fee (I think it will follow inflation, and must be paid off with 25 years)

What sort of amount were you considering? It's easy for the seller to encourage you to use it in regards to a bigger property, but you need to factor affordability in terms of

Mortgage Repayment
Loan
Increased council tax
Higher rates

If your considering new build you can only make a good guess at your council tax band, it won't be set till your in the property.

Do the finance you can afford a month, the work out what would work with loan, mortgage and deposit

So by year 10 we would be paying 5% interest rates? If the interest doesn't begin until the 6th year?
The property they showed us was 265,000, with our 5% deposit and 20% gov loan it means our mortgage would be 201,400. On a joint income of around £54000 rising to £65000 in 3/4 years time. It's just a case of working out childcare and other expenses like you said and being strict with income. There is no point in being so hard up with a mortgage that you can't live happily with holidays/days out etc?

The interest rates are much lower than a standard loan but remember you'll be paying for these on top of a mortgage. If you are serious about proceding the help to buy agent will work through all the details and potential cost.

I guess they will be able to give us an idea of what it will cost per month for the first 5 years. And then what happens per year as the rates increases. At least then we would know if it's possible.

One thing I would like to know about Help to Buy is this:

Say after 5 years, you want to buy the government's share. Who does the valuation of the house at that time?

We know estate agents like to price up...

All valuations for redemption are similar to a mortgage survey and, as such, have to be done by an independent valuer/surveyor - an estate agent valuation would not be sufficient.

Also, you've miscalculated in your example - if you had equity of 30k that you'd paid off the mortgage, you'd actually get 50k after the mortgage had been paid off as the mortgage company wouldn't be owed the 20k, so then after paying the government off you'd be left with your 30k.