Help to Buy - anyone done it?

[KitKat1985]

Hi. We live in the South East and are in the process of putting our two bed shared ownership house on the market (we have a 50% share) and using the equity as a deposit towards a three bedroomed place. I know roughly what our budget is (will meet with a market broker to confirm exact amount we can borrow) but we're unlikely to have a lot of options available to us in our price bracket (probably around the £220,000 mark, which around here doesn't buy you a lot sadly). Our options are either:

1. Buy what we can outright in that budget, but unlikely to be much bigger than we have now / be in poor condition / a bad area.
2. Look into getting another shared ownership property.
3. Use the 'help to buy' scheme to get a new build with a 20% equity loan from the government, which is the option I think we're leaning towards as there's quite a few developments around here and the houses generally seem nice and in reasonable areas.

So, has anyone used Help to Buy? How did you find it?

Bump.

Hi KitKat, we are in the process of doing this - I haven't got much advice for you I'm afraid but the process seems straight forward now. We had to get 'pre approved' by the developer's mortgage broker before we were able to reserve a plot. You will still need a deposit for the full price of the property, not the help to buy price.

Hi. Thanks for this Tortious. Can I ask what your plans are regarding the 20% equity loan? Are you planning to save to hopefully buy the other 20% in a few years or are you planning to sell at some point down the line (assuming no negative equity) and repay it that way?

That's the key question @KitKat1985 - if you did H2B what would your plans be to repay the 20% equity loan at the end of the 5 years?

Help To Buy should really be called... ''Help to Keep Property Prices Inflated by Enabling People to Take on Shed Loads of Additional Debt''

It's not quite as catchy but it's more accurate and clears up any confusion about it's true purpose.

It's not an exact science is it, but we're hoping to save as well as overpay on the mortgage, then re-mortgage at the 5 year mark to roll whatever is left of the loan into the mortgage. Hopefully we won't be in negative equity!

So you're counting on house prices going up and your circumstances remaining unchanged (no additional children, mat leave, lower paid job etc). Having to find an additional 20% in 5 years is quite scary.

Sall74 I share your views on this in many ways, I just can't see any other way sometimes of moving out of this house. I currently live in a cramped house opposite a drug den and all the local schools are awful. DD1 is nearly 3 and DD2 is nearly 8 months. I just don't want them to grow up here.

Tortious that's a similar approach to what me and DH are planning on doing. We'll save as much as we can, especially in the 5 year interest-rate free period. At the end of that we'll try and have enough to buy the other 20%.

We have considered the worst case scenario though, which is that we fall into negative equity and never manage to buy back the other 20%. Our plan in that circumstance will just be to stay in the property for 20-odd years until the mortgage is pretty much paid off, and then sell up, give the government back it's 20% equity (however much that's worth then), pay off the little left outstanding on the mortgage, and just use what's left to live in a bedsit if that's all we can afford, as the DD's will be old enough by then to not need to live with us. That's the absolute worst case scenario though, but obviously we have to consider it as a possibility.

Hipster you don't have to repay the loan at the end of 5 years. You have to buy out the government's 20% share within 25 years, or sell up at some point in the 25 year period and give 20% of the sale price to the government. The 5 year period refers to the fact that you don't pay interest on the loan for the first 5 years.

We were in the same position and bought an absolute dump of a place but own 100% of it (with a mortgage). Think flat on a main road, needed gutting back to brick and renovating from scratch. We're getting there slowly with the work it need but I don't regret our choice for a minute because it's all ours.

OP your current house doesn't sound great tbh, shared ownership next door to a drug den - are you sure you can even sell it?

And if your reply to Hipster is referring to you leaning towards HTB then you've got it wrong. At the end of the HTB period you need to pay back the loan with interest. It's not shared ownership where the government will just wait for its piece of pie.

I'm hoping no-one works out there's a drug den opposite if I'm honest. It's not immediately obvious (inevitably the people who live opposite try to be subtle about it), but those of us who live nearby are aware of it. Our house itself is actually in fairly good condition (we've tried our best to look after it), it's that it's not big enough for us any more, but it would work as a starter home for someone.

There's some detailed information on HTB here. www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-oct-16-V1016.pdf
I originally thought it was more like a loan before I read this, but basically the government own a 20% share (at whatever value that 20% is worth at the time) and after 5 years you pay interest on their share, rather than rent as you would with a shared ownership. It's sort on in-between shared ownership and a loan.

I'm still not 100% sure on it though, which is why I was hoping to hear from people who have done it.

We used HTB 3 years ago to enable a move involving change of school and employment but it was always at the back of our minds that we would sell within 5 years, before the equity loan (the interest on it) became repayable.

We decided to make the move in January of this year as prices in our area had increased and we were in a position to purchase our next property with a mortgage, removing the HTB element.

Our property had increased by 47k within the 3 years, meaning HTB gained just over 11k. It cost us £550 to have the valuation and subsequent paperwork agreed by the HTB company.

Although we benefited at the time, having the HTB element was always at the back of our minds and we subsequently made the decision to sell and repay in full as it suited us.

Best of luck.

We live in the south east too and are FTB. we were seriously looking into using HTB as it seemed anything that suited our particular family and work needs was financially out of our reach. Even using the HTB we would still have needed to move out of area which we don't want to do because of the kids schools and transport links to London.

In the end we decided to buy a 200 year old mid terraced house in our perfect location but that is a bit too small for us and will need quite a bit of extending in the near future. We've done this without HTB as we just didn't like the idea of the loan hanging over us, having to move out of our location or new builds at all tbh.

Hi. Thank you to those who've shared their experiences. It's really useful to have some real life experiences of this.

Hi,

Seems there's quite a few negative comments about HTB here and they may well be right but we had a really positive experience so wanted to provide it for a bit of balance.

We are in south east and bought a house with HTB then sold it within two years, fortunately the prices had gone up and we made a good profit so were then able to buy with a normal mortgage in our more preferred location (though it still needed work).

You are quite right in that you don't need to pay the whole 20% off in 5 years time, you start paying interest at 1.75% after 5 years so you will need calculate the cost of that into your budget. You do need to pay it off after 25 years or when you sell the house, whichever comes first.

We had intended to see in 5 years but also due to our careers were also confident we would be able to re-mortgage either within or shortly after that time to pay off the equity part of the loan.

As I say it worked well for us and without it we would still be living in rented accommodation. As it is we've been very lucky and it's set us up for our next move.

Another thing to consider is that the HTB people will expect you to see a mortgage adviser that understands HTB and the lending criteria is slightly stricter so you may end up with an offer of a slightly smaller mortgage than you would going for a normal mortgage. Our mortgage broker was excellent and was recommended through the developer who was building the house.

If you want any more info then feel free to PM me.

Have any FTBs here looked at the Help to Buy ISA?

Hi Suzy. It's really nice to hear you had a good experience. I'm a bit anxious about what you said about the stricter mortgage criteria though. I was estimating on us being allowed a mortgage of about 3 and a half times our annual salary. Do you think that's unrealistic? We have a reasonable deposit for a HTB (between 10-15% of the full purchase value rather than just 5%).

Hi there KitKat. I haven't used the scheme but a friend of mine has (although in Scotland so perhaps different rules.) Just wanted to draw your attention to the fact that you are not allowed to do any major renovations to your property (extension, garage conversion etc) if using help to buy. I believe the rationale behind this is that the government believe if you have the funds to do this then you should be repaying the loan element. My friend got caught out by this as she expectantly fell pregnant with a second child and thought she could convert her garage but wasn't allowed. She has had to move and has lost a lot of money as new houses are still for sale in her development, so she had to reduce the selling price of hers significantly to shift it. I would say it's a great scheme if you see it as a long term home.

I don't think 3.5 times is a problem, ours was about that.

If I was you I would go and speak to the sales teams at the developments you are interested in as they might be able to point you in the direction of a broker that is dealing with HTB people on their development.

If you are in the SEast I can point you in the direction of mine?

Hi Catlover. Yeah I was aware of the rule about renovations, but thank you. If we buy a HTB we intend to stay in it for the long-term (and I definitely don't plan on having any more kids!) so hopefully that would be okay.

Thank you for the reply Suzy. That's really reassuring. We're in East Sussex so if you know any good HTB mortgage brokers locally we would really appreciate any recommendations.

We spoke with a mortgage broker (London and country who is recomend by Martin Lewis) as they have a specialist team. We were second time buyers but had been stung by negative equity with a 100% Northern Rock mortgage taken out just before the crash in 2006 (), so were very risk averse and I'm glad we had proper advice on it this time round!

It turned out not to be for us, as we could only use it on a new build (as not first time buy), and the new builds in our budget were being built in droves in our locality. We just felt they were over priced and we felt fairly sure the 20% loan wouldn't be made up in any way by a rise in property prices (2015 in the North). We luckily could afford to buy a non-new build in the area we wanted that was suitable for our needs without the scheme, and the extra money we'd have to have saved us each month to be able to pay back the loan after 5 years (about £25K) meant we may as well just stretch to the very top of our mortgage capacity instead as that was cheaper monthly outgoings.

Different situation than you though, as it sounds like you're out priced by the market locally for what you're looking to buy? It's a tough one, but as we were looking for a long term home we felt we couldn't risk having to sell in five years if we didn't manage to save the money. As it happens, a few of the houses on estates we looked at are starting to sell and either going for what they paid or up to 5% under, or not selling at all, and I think it's because the prices were inflated by the house builders to start with, and they lose their appeal a bit when it's not your choice of kitchen/tiles/carpets etc. So just go into it with your eyes open and maybe have a conversation with a specialist broker who should be honest and give you some advice on the options for you.

Also, the house we did buy had a new build estate constructed right behind us after we moved in (hence why the vendor were selling cheap to us) and I have to say the quality is poor, tradesmen who worked on our house at the same time had a lot of negative things to say about the build as they were going up, and the owners have had lots of problems (including a planning dispute) so take care to pick your builder and site carefully if you go for new build as I would be much more cautious now

Zombie thread revived by canned meat saleswoman.

Ah! After my essay above I realised this was a zombie thread that has been restarted . . . Have reported