How does help to buy work?

[skittleboy]

I'm confused. I thought that the government will lend you 20% of the price of the house and then you pay it back after 25 years.

But some people say that if the value of the house rises you still have to pay 20% of the value of the house after the 25 years.

But some say that's only if your going to sell it.

I don't know who to believe. Has anyone had any experience with help to buy?

Okay so you borrow up to 20% of the house price

You pay it back from day 1 but jts interest free for 5 years

Whenever you go to sell you pay 20% of the house value at that time, regardless of what you paid for it

If you don't sell you will just continue to pay it for as long as it is (no idea, maybe 30 years?)

@Amijustagrump What if I paid it all back before selling? Do I still have to pay the government anything?

Nope you wouldn't

When you come to pay it back your house will be valued and you will pay 20% back of the current value, so if your house increases in value you will pay back more than you borrowed, and vice versa.

You can also pay it back via remortgaging.

@Amijustagrump what do you mean you pay it back from day one? There's nothing to pay back in the first 5 years (except a £1 a month admin charge) after 5 years you pay the interest on the loan, this does not pay anything of the loan back. You do not pay anything off monthly. It HAS to be paid back after 25 years. It isn't paid off gradually, it's done either in one go or in staircased lump sums with cash from savings, remortgaging or selling.

You get 20% (or 40% in London). After five years you pay a monthly fee and when you sell or pay back the loan you pay out 20% of the current value.
There are a few things to remember

1. You can only buy a new build which comes with its own increase in price
2. The offers for mortgages rates and times per your salary are more limited and not as good
3. They have a load of extra rules you need to pass. I fell down that all my outgoings were 41% of my net salary and the max was 40%. This isn't advertised or mentioned anywhere in their literature. My student loans and pension were included in this calculation.

@Bells3032 the rates aren't as good as a like for like LTV but they're much better than a 95% LTV if you only have 5% (like us) Especially at the moment! That's interesting about the affordability, we have just gone through the process and were told we'd passed affordability (weeks after applying) and I had no idea what they were talking about, they didn't mention it at all during the process.

I was told id failed it and that was why. I found the cheapest 2 bed flat I could get was over 500k so I needed a £50k deposit and salary of £75k to afford it anyways. I was able to buy a second hand flat for 350k out right.

It's not always the best value. Just whether it's worthwhile for you.

@Bells3032 500k for a flat!!!!!!!! What? You must live in London.

I do but this was still zone 4. They massively overinflated the new build prices in the light of htb. Was absolutely madness. This was 4 years ago just before brexit. Now people who did buy them are struggling to sell them at anything close to that. A non new build won't get more than 400k

New builds are over priced and help to buy is absolutely a part of that no doubt, hard to imagine they will shift at the same rate without it, but baring in mind you get everything brand new, warranty, there's very little outlay in the medium term (there will be in the short term depending on what deal you have for flooring etc) for buyers like me who have very little up front cash a move in ready house with low bills and maintenance is very cost effective. A like for like comparison here is £30,000 difference but the new build had brand new boiler, appliances, flooring, decoration and a more functional modern layout, so for me worth the £30,000.

They wouldn't be a smart move for a short term investment, but if it's a long term purchase it doesn't really matter if you're paying a bit more for the fact it's brand new, eventually that new period passes and prices will increase as other houses do, but you just won't see as much "profit" but I don't buy houses for profit, this is our "forever" home. Plus most people spend some money doing a house up, we don't need to do that.

Maybe it's more acute in London.

Whoops my bad! Sorry, clearly not that accurate information