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Bruce Banner

Help to buy interpretation - Misleading?

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I've noticed a few of these ads on Rightmove, on this one the price is stated as "From £316,000"..... So, is the house £79,000 cheaper if you use HTB or is it a misleading ad?

The listed price includes the 20% government funded equity loan on the HELP TO BUY SCHEME. Price without Help To Buy is From £395,000. With the government's HELP TO BUY EQUITY LOAN SCHEME* you will need as little as a 5% deposit. The Government will provide an equity loan of up to 20% which means you will only need to obtain a 75% mortgage. Typical mortgage repayment would be £905.21 per month. *Subject to status.

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Same goes for shared ownership - '80k! (50% shared ownership, to be paid back over the mortgage term. rental payments due on the shared owned bit'

EA put stock text into their ads and have not adjusted them.

HTB is a total trap unless you expect your earnings to rise substantially.

Most HTB is well north of Luton, so the likelihood is zilch.

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The ad appears to imply that the 20% is a grant rather than a loan, quite misleading if true.

I also suspect that many do not appreciate what an equity loan is. If the price doubles then many will be rubbing their hands at how clever they are, not realsizing that they will only get 80% of the gain.

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I've seen similar adverts, adding the lines of 'houses from £x......or £x-20% with help to buy'. Thought it was naughty at the time, wish I'd saved the link.

In this day and age, you probably just need to go balls deep. Claim it was mis-sold when the time comes, and........kerching!

Have an ex-workmate in Newbury, bought a 300 grand house with 'HTB'. He freely admitted he won't be able to afford the loan payments once they kick in, so glad we're up against others with such a diligent approach to planning their financial future.

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It's been false advertising since it started.

I complained about one that was particularly annoying. Not only did it imply the house was cheaper (It isn't you just own less of it), it had a photo of a detached house but it was only a semi. They response was to change the photo but the HTB wording remained.

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Not so much misleading; but folk have to pay back that 20% equity (40% for London) loan from the government.

And you start paying back the (variable) interest on the equity loan at five years.

We're a few years away from a whole lot of people facing bankruptcy as the equity loan interest payments drag them into the red each month.

Or when they have to pay it back during a sell off of the house... especially in a stalled or falling market.

Oh the joys of having a property partnership with the government.

Old business adage: as soon as you have a partner, you have a boss.

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4 minutes ago, cashinmattress said:

Not so much misleading; but folk have to pay back that 20% equity (40% for London) loan from the government.

And you start paying back the (variable) interest on the equity loan at five years.

We're a few years away from a whole lot of people facing bankruptcy as the equity loan interest payments drag them into the red each month.

Or when they have to pay it back during a sell off of the house... especially in a stalled or falling market.

Oh the joys of having a property partnership with the government.

Old business adage: as soon as you have a partner, you have a boss.

More like we're a few years away from the mis selling scandal that says that people didn't realize the 20% was a loan that bears interest; it was a grant. Also there will be stories about people who want move on but can't because they have to pay back some of the gains (because it's an equity loan) on the sale of their current property.

How much of the HTB loans will be repaid? I'm guessing a good deal less than 100%.

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5 minutes ago, crouch said:

More like we're a few years away from the mis selling scandal that says that people didn't realize the 20% was a loan that bears interest; it was a grant. Also there will be stories about people who want move on but can't because they have to pay back some of the gains (because it's an equity loan) on the sale of their current property.

How much of the HTB loans will be repaid? I'm guessing a good deal less than 100%.

Oh, they'll be repaid alright - by us, the idiotic prudent.

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Year six of HTB the rate is 1.75% then it increases yearly by 1% plus any RPI increase. And this is on a loan that nobody can possibly know the amount of as it is a % of the property value. So HTB signed people up to a loan with no fixed amount and no guaranteed payment rate. For a property with a new build premium attached.

The builders did well, the 'buyers' not so much. 

The debt forgiveness will start in 2018 after a few bankruptcies and miss selling claims (which may have some merit)

 

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36 minutes ago, on the hill said:

Year six of HTB the rate is 1.75% then it increases yearly by 1% plus any RPI increase. And this is on a loan that nobody can possibly know the amount of as it is a % of the property value. So HTB signed people up to a loan with no fixed amount and no guaranteed payment rate. For a property with a new build premium attached.

The builders did well, the 'buyers' not so much. 

The debt forgiveness will start in 2018 after a few bankruptcies and miss selling claims (which may have some merit)

 

I don't think in this case it will be possible to claim mis-selling.  These are the headline and first words on the HTB page on the Government website  https://www.helptobuy.gov.uk/equity-loan/equity-loans/  Plenty of mention of loan (not grant) and of fees.

"How does it work?

With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.

You won’t be charged loan fees on the 20% loan for the first five years of owning your home."

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I suppose we will have to wait and see. Though I'm not sure that people were made aware of the all the negative situations that could arise from HTB. I say that as many brokers and bank mortgage staff hadn't the foggiest what they were doing when HTB started. Much of the builders advertising was miss leading to many. Regardless of how it happens I can't see how many of these loans can or will be paid back so in one way or another it will end up with tax payer donations to the 'buyers'

 

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7 minutes ago, on the hill said:

I suppose we will have to wait and see. Though I'm not sure that people were made aware of the all the negative situations that could arise from HTB. I say that as many brokers and bank mortgage staff hadn't the foggiest what they were doing when HTB started. Much of the builders advertising was miss leading to many. Regardless of how it happens I can't see how many of these loans can or will be paid back so in one way or another it will end up with tax payer donations to the 'buyers'

 

If what you say is true then it's the banks and builders that missold it so they should take any hit.

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53 minutes ago, on the hill said:

Year six of HTB the rate is 1.75% then it increases yearly by 1% plus any RPI increase. And this is on a loan that nobody can possibly know the amount of as it is a % of the property value. So HTB signed people up to a loan with no fixed amount and no guaranteed payment rate. For a property with a new build premium attached.

The builders did well, the 'buyers' not so much. 

The debt forgiveness will start in 2018 after a few bankruptcies and miss selling claims (which may have some merit)

 

So for Londoners who've taken 40% HTB to the max at £600k; £4,200 in year six, ~ £5,520 the year after...etc..

And for everybody else, at the average price of say £220k, on the 20% HTB that's £770 year six, ~ £1,012 (today's RPI) each year afterwards.

Long term RPI is around 1.5%, so it's a further hefty cut out of what will be already stressed personal finances if you're HTB'ing.

Plus you will have to deal with the government... buying... selling... etc... everything.

Want to put a conservatory on? Want to do any alterations? Want to do an extension? Want to put solar panels on? Want to sell? Get permission from gov't (plus their fees)...

Overall HTB is restrictive and of no real benefit to the mortgage holder. No surprises there.

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5 minutes ago, Bruce Banner said:

It will if it suits the government's agenda.

I don't think one of the government's flagship programmes will be re-branded as mis-selling, certainly not if it is the same political party when the crunch comes.

The scapegoats will be the economy, the EU, perhaps even Brexit if the political landscape is re-written in the next five or so years.

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10 minutes ago, cashinmattress said:

I don't think one of the government's flagship programmes will be re-branded as mis-selling, certainly not if it is the same political party when the crunch comes.

The scapegoats will be the economy, the EU, perhaps even Brexit if the political landscape is re-written in the next five or so years.

The mis selling charge would be levelled at agents (builders, mortgage brokers) rather than the government itself. The fact that HTB was utterly wrong, in my view an utter scandal, in the first place ( and many said this at the time) won't matter; it will all fall on the agents.

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39 minutes ago, cashinmattress said:

I don't think one of the government's flagship programmes will be re-branded as mis-selling, certainly not if it is the same political party when the crunch comes.

The scapegoats will be the economy, the EU, perhaps even Brexit if the political landscape is re-written in the next five or so years.

 

25 minutes ago, crouch said:

The mis selling charge would be levelled at agents (builders, mortgage brokers) rather than the government itself. The fact that HTB was utterly wrong, in my view an utter scandal, in the first place ( and many said this at the time) won't matter; it will all fall on the agents.

I'd rather you were right than I was :) Not too far off now til realisation hits the 2013 buyers.    

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On 12/28/2016 at 10:02 AM, crouch said:

The ad appears to imply that the 20% is a grant rather than a loan, quite misleading if true.

I also suspect that many do not appreciate what an equity loan is. If the price doubles then many will be rubbing their hands at how clever they are, not realsizing that they will only get 80% of the gain.

I always find it interesting how often they use the term "equity" .That is the one thing the young people being talked into such a disaster as HTB will probably never have much of.

Saying that,i was talking to a young guy last week who lives with his parents and earns £35k a year here in the North.He was really pleased he could use HTB to get a two bed new build (£98k including the HTB bit).I asked him why he didnt stay at home another 8 months and save the £20k.He said he had only saved £4k in 8 years so far.On £35k,At parents.

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8 minutes ago, durhamborn said:

I always find it interesting how often they use the term "equity" .That is the one thing the young people being talked into such a disaster as HTB will probably never have much of.

Saying that,i was talking to a young guy last week who lives with his parents and earns £35k a year here in the North.He was really pleased he could use HTB to get a two bed new build (£98k including the HTB bit).I asked him why he didnt stay at home another 8 months and save the £20k.He said he had only saved £4k in 8 years so far.On £35k,At parents.

He'll welcome the interest charge on the £20K and the HTB loan repayment schedule then. He'll be in trouble from day 1.

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Just now, crouch said:

He'll welcome the interest charge on the £20K and the HTB loan repayment schedule then. He'll be in trouble from day 1.

Add in the fact its very likely he will never earn more than he does now in the North East.Make hay while the sun shines seems lost on some/most people.

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7 minutes ago, durhamborn said:

Add in the fact its very likely he will never earn more than he does now in the North East.Make hay while the sun shines seems lost on some/most people.

The remaining £31k currently goes into the economy. Once he's mortgaged that will end and ultimately affect the wider economy. We can already see this with pubs and clubs closing. Image if we don't see HPC there will only be banks left.

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