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AdamoMucci

First HTB fees due next month

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Google link to read: https://www.ft.com/content/633f5bc4-1e2b-11e8-956a-43db76e69936

I never really paid much attention to the details of HTB. Government is going to lend people money to buy over priced houses who do not qualify on their own. What more is there to know? Ridiculous way to "help" the housing crisis.

Now, reading some details in the article, I just cannot help chuckling to myself. I know that perhaps that does not look great on me as some people are definitely going to suffer, but its just difficult not to laugh at such absurdity.

- Only applied to new builds, those great maintainers of value
- In 2016 buyers in London started being allowed 40%! - LOL (First fees due on these in 2021)
- Fee is 1.75% of the value of their loan, increasing each year by RPI plus 1 per cent! - LOOOOL
- According to official statistics nearly 145,000 properties were bought using Help to Buy loans by last September - no idea if that is "a lot" in the grand scheme of things
- About 38 per cent of Help to Buy borrowers have an income below £40,000 --- LOL

 

I dont know if anyone here is aware of this, but prices seem to be increasing by a negative percentage at the moment in London...
Also, not sure if anyone is aware of this, but there seems to be a slight upward pressure on interest rates too...

What to make of it all......................

 

Quote

"The Resolution Foundation, a think-tank, said the fees presented “a ticking time bomb” for families who held Help to Buy loans."


That is rich coming from them. RF was set up by a bunch of Blairite ex-MPs and advisors. How is their record on housing?

Edited by AdamoMucci

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40 minutes ago, AdamoMucci said:

- Fee is 1.75% of the value of their loan, increasing each year by RPI plus 1 per cent! - LOOOOL

if these are non-recourse loans, if I'm not mixing things up - if sufficient negative equity is accumulated then this means the mortgagee may feel compelled to sell up thus cancelling out the (non recourse) HTB loan and therefore not having to pay the fee anymore.

 

Have I missed something?

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4 minutes ago, Si1 said:

if these are non-recourse loans, if I'm not mixing things up - if sufficient negative equity is accumulated then this means the mortgagee may feel compelled to sell up thus cancelling out the (non recourse) HTB loan and therefore not having to pay the fee anymore.

 

Have I missed something?

More info here - Neverwhere pointed me in the direction of this useful thread earlier.

 

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From the article, “From next month, the average borrower living outside London will owe the government £652 over a year, with the figure rising to £788 by 2023, according to analysis by the Resolution Foundation. For those in London, the average fee will be £927 for the year beginning next month, rising to £1,121 by 2023.”

This is not a bankrupting amount, outside London it is about £55 per month gradually going up to about £65 per month over five years.  

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So you get some money to help you buy an overpriced brand new build and after five years get hit with interest costs:

. How do these interest costs compare to the mortgage rate on the rest of the loan?

. Harder to sell given you bought it brand new and maybe such a scheme no longer exists for your potential buyers?

. Do you have to pay the government back the full value of the loan on sale (i.e. no carry forward to another property)?

. Do you have to pay back the full loan even if you sell for less than purchase cost due to negative equity?

. Alternatively, does the government get a slice of any gains?

. Is the government loan really a non-recourse loan?

. Any comeback in any form and by any party on the original housebuilder/seller?

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4 minutes ago, Fence said:

So you get some money to help you buy an overpriced brand new build and after five years get hit with interest costs:

. How do these interest costs compare to the mortgage rate on the rest of the loan?

. Harder to sell given you bought it brand new and maybe such a scheme no longer exists for your potential buyers?

. Do you have to pay the government back the full value of the loan on sale (i.e. no carry forward to another property)?

. Do you have to pay back the full loan even if you sell for less than purchase cost due to negative equity?

. Alternatively, does the government get a slice of any gains?

. Is the government loan really a non-recourse loan?

. Any comeback in any form and by any party on the original housebuilder/seller?

Have a look at Neverwhere’s Help to Fire Sale thread that I posted above.  It’s really informative on HTB.  

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27 minutes ago, Mancunian284 said:

More info here - Neverwhere pointed me in the direction of this useful thread earlier.

 

I don't really fancy reading the whole of that thread, really wondering if anyone who already feels they have digested all that info can offer an opinion on whether I have a point here or not?

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18 minutes ago, Si1 said:

I don't really fancy reading the whole of that thread, really wondering if anyone who already feels they have digested all that info can offer an opinion on whether I have a point here or not?

Yep, you have a point.  It sounds like the HCA have to approve the sale before you can walk away from the agreement and doesn’t state on what grounds they will/won’t approve the sale (as far as I can tell).

16 In the event that the proceeds of the sale of your property (after sums due to the first standard mortgage lender – excluding any redemption penalties - have been repaid) are not enough to pay the amount repayable for the equity mortgage, then (provided you have complied with the terms of the equity mortgage) the HCA will accept the balance of the sale proceeds as full repayment of the equity mortgage. In doing this they will agree to release the charge over your property and will not take action to recover any further monies from you. Please note that the HCA (or their agent) will need to approve the sale before the charges can be released.

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39 minutes ago, Mancunian284 said:

Yep, you have a point.  It sounds like the HCA have to approve the sale before you can walk away from the agreement and doesn’t state on what grounds they will/won’t approve the sale (as far as I can tell).

16 In the event that the proceeds of the sale of your property (after sums due to the first standard mortgage lender – excluding any redemption penalties - have been repaid) are not enough to pay the amount repayable for the equity mortgage, then (provided you have complied with the terms of the equity mortgage) the HCA will accept the balance of the sale proceeds as full repayment of the equity mortgage. In doing this they will agree to release the charge over your property and will not take action to recover any further monies from you. Please note that the HCA (or their agent) will need to approve the sale before the charges can be released.

Wow. That could get interesting.

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55 minutes ago, Mancunian284 said:

Please note that the HCA (or their agent) will need to approve the sale before the charges can be released.

I’m not sure about this bit though.  Does it mean that the HCA could just not approve the sale leaving the HTB purchaser stuck with the property?

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i overheard a girl talking to her mates last year about buying a flat with help to buy 350k.  looked about 21 and signed up to a 35 year mortgage. 

all her friends congratulating her on getting on the property ladder "you`re so lucky they are going up too." 

flucking nuts. 

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54 minutes ago, Mancunian284 said:

I’m not sure about this bit though.  Does it mean that the HCA could just not approve the sale leaving the HTB purchaser stuck with the property?

I may have the wrong get end of the stick but I thought the HTB was effectively QE money printing. We give you 25% if you go bankrupt negative equity etc and need to sell subject to conditions we will write off the htb portion of the loan.

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11 minutes ago, GreenDevil said:

I may have the wrong get end of the stick but I thought the HTB was effectively QE money printing. We give you 25% if you go bankrupt negative equity etc and need to sell subject to conditions we will write off the htb portion of the loan.

Would the HTB purchaser have to provide the HCA with a reason the HCA approve of for needing to sell though?

Example 1 -  HTBers are a couple who are getting divorced and neither can afford to buy the other out - HCA agrees the sale is necessary so approves the sale.  Example 2 - HTBers have a one bed flat and decide they want to move to a bigger property but don’t actually need to ie they haven’t suddenly had twins - HCA says the sale (and walking away from the HTB equity loan) is unnecessary so doesn’t approve the sale.

No one actually needs to sell just because they are in negative equity, in fact they don’t actually realise the negative equity unless they do sell.  As long as they can afford the monthly mortgage and HTB repayments there is no reason for them to insist on selling just because they are in negative equity.  Maybe the HCA will only approve sales of HTB properties in negative equity if the HTBer can demonstrate they are in financial distress and can’t afford to make the monthly repayments.

 

I don’t know the answer to this and haven’t been able to find out.  

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Example 3. You lose your job and go bust on expenses. BMW on pcp, skiing holidays. That'd be covered as think of the economic good.  Better than those savers.

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12 minutes ago, GreenDevil said:

Example 3. You lose your job and go bust on expenses. BMW on pcp, skiing holidays. That'd be covered as think of the economic good.  Better than those savers.

Sounds like half my colleagues.  Although sometimes I think I’m the stupid one for saving up and leading a comparatively frugal lifestyle.

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2 minutes ago, Mancunian284 said:

Sounds like half my colleagues.  Although sometimes I think I’m the stupid one for saving up and leading a comparatively frugal lifestyle.

But if people like you are not sacrificing, who else is going to cover the HTB write-offs?

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3 hours ago, longgone said:

i overheard a girl talking to her mates last year about buying a flat with help to buy 350k.  looked about 21 and signed up to a 35 year mortgage. 

all her friends congratulating her on getting on the property ladder "you`re so lucky they are going up too." 

flucking nuts. 

Probably worth 400 now lol. God, this country and its housing addiction has probably added 10 years to my age in stress.

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1 hour ago, Slimline said:

Probably worth 400 now lol. God, this country and its housing addiction has probably added 10 years to my age in stress.

Assuming its London.

Instance 20% new build dsicount - 280k.

Then flats are falling likes bricks at the mo - itll be less than 200k ina few years.

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5 hours ago, AdamoMucci said:

If prices in London fall by 40% tax payers are going to be writing off some big loans.

Don't think of it as taxpayer loss. 

Think of it as QE straight into the pocket of the housebuilder.  

Look after your mates.

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It seems renting out is not an option either. HTB does not allow renting out your home. I want to repay my Help to Buy loan in order to let my house

Quote

Q Due to a change in circumstances I am looking to rent out my house. However, because I have an equity loan from the Help to Buy scheme, this is forbidden. As a result I’m looking to repay my Help to Buy equity loan but don’t know how to go about doing this. Do I contact the mortgage provider or a solicitor? Also, once my mortgage repayments increase does this mean the house is fully mine or is this not the case until its fully repaid? JD

A Even though you had help in the form of an equity loan from the Help to Buy scheme and a mortgage from your lender, the house is already fully yours, as you will be registered as the legal owner with 100% title to your home. Your mortgage lender and Help to Buy agent do not become joint owners with you. However, to protect the loans they make to you, your mortgage lender will take a first charge over the property and the Help to Buy agent will take a second charge over it to ensure that if the house is sold, they get enough of the sale proceeds needed to repay what you owe them.

So banks have the first charge and HCA has a second charge. That is if you make any profit ... What happens if you make a loss? Does the charge order remain same? Please help me understand.

Edited by Fairyland

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9 hours ago, Mancunian284 said:

Would the HTB purchaser have to provide the HCA with a reason the HCA approve of for needing to sell though?

Example 1 -  HTBers are a couple who are getting divorced and neither can afford to buy the other out - HCA agrees the sale is necessary so approves the sale.  Example 2 - HTBers have a one bed flat and decide they want to move to a bigger property but don’t actually need to ie they haven’t suddenly had twins - HCA says the sale (and walking away from the HTB equity loan) is unnecessary so doesn’t approve the sale.

No one actually needs to sell just because they are in negative equity, in fact they don’t actually realise the negative equity unless they do sell.  As long as they can afford the monthly mortgage and HTB repayments there is no reason for them to insist on selling just because they are in negative equity.  Maybe the HCA will only approve sales of HTB properties in negative equity if the HTBer can demonstrate they are in financial distress and can’t afford to make the monthly repayments.

 

I don’t know the answer to this and haven’t been able to find out.  

I wonder if the HCA can approve sale on condition of x% of the HTB loan repaid?

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I have said from the beginning that HTB is going to be a total disaster that we will hearing a lot more about in the future...such a grotesque and cynical scheme can only end one way and that is in tears.  It wouldn't surprise me if the fall out from this misadventure brings the government down.  Watch this unfold....

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I can see the following possibilities:

1. The wealthy(100K + ?) would have gathered enough equity in 5 years to staircase.

2. Some will staircase with BOMAD help.

3. Some(over leveraged) will default.

4. Others who had any wage rise would pay the fees.

I think fees are like an interest an interest only mortgage i.e you pay the interest on something you don't own.

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