First HTB fees due next month

[winkie]

No such thing as a free lunch........ will always be a payback time, just a case of when?

[Andy T]

When this first came out I got the impression that it was touted as being 25% of the loan that you would start to pay back after 5 years (i.e. when you were older and on higher income in theory, etc.)

So it's actually interest only/fees paid on that 25%, increasing each year, no option of paying down the capital on that part?   so you could own it for a further 5 years, have paid a load of fees and potentially even if the house has increased in value, you come away with very little equity (probably just what you have paid down on the 75% ?)

[spyguy]

2 minutes ago, Andy T said:

When this first came out I got the impression that it was touted as being 25% of the loan that you would start to pay back after 5 years (i.e. when you were older and on higher income in theory, etc.)

So it's actually interest only/fees paid on that 25%, increasing each year, no option of paying down the capital on that part?   so you could own it for a further 5 years, have paid a load of fees and potentially even if the house has increased in value, you come away with very little equity (probably just what you have paid down on the 75% ?)

Worse.

Overpay for new build. Discount the 10% new build premium and the 25% overpayment and that 25% help is look dubious.

[Neverwhere]

3 hours ago, Andy T said:

So it's actually interest only/fees paid on that 25%, increasing each year, no option of paying down the capital on that part? 

It's interest only but the borrower can arrange for a valuation and pay it off, or make a part payment worth at least 10% of the property's value, at any time.

It has to be paid off in full by the end of the 25th year, if the property isn't sold before then.

In the meantime the increase in payments each year is likely to be relatively small, because it's a percentage increase on the interest charge, not in the interest rate, (if that makes sense):

Quote

Example 4

If we use the above example without using the RPI in the calculation then:

In the sixth year the total interest charge would be £3,500 pa i.e. 1.75% of £200,000. You would have to pay £700 in the sixth year i.e. 20% of £3,500 which is about £58.33 a month.

In the seventh year the total interest charge will be increased by RPI plus 1% so the total interest charge will be £3,535 i.e. £3,500 plus a 1% increase. You will pay 20% of that amount which is £707. So your seventh year interest charge will be £707 or about £58.92 a month plus RPI increases.

[. . .]

Example 5

As an example using RPI then:

In the sixth year is £3,500 i.e. 1.75% of £200,000, using example 4, then you would have to pay £700 in the sixth year i.e. 20% of £3,500 which is about £58.33 a month.

In the seventh year the total interest charge will be increased by RPI plus 1%. The RPI increase which will be used will be the annual increase for the 12 month period ending at the end of September immediately preceding the date on which the interest charge is reviewed (which will be on 1 April in each year). If we take the RPI increase of February 2011, this is 5.5%. The total interest charge is therefore increased by 6.5% (i.e. the 5.5% RPI increase plus 1%) so the total interest charge will be £3,727.50 i.e. £3,500 plus a 6.5% increase. You will pay 20% of that amount which is £745.50. So your seventh year interest charge will be £745.50 or about £62.13 a month

Source

[Neverwhere]

On 05/03/2018 at 12:55 AM, Mancunian284 said:

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

I think the intention is probably to prevent below market value sales to connected parties, so the HCA agent might be checking the agreed sale price was broadly in line with recent local sales, or looking to see if there was any kind of pre-existing relationship between the seller and the buyer.

If the HCA acted in a way that could be considered unfair then the borrower would be able to challenge that under consumer protection legislation.

[Bear Hug]

2 hours ago, Neverwhere said:

It's interest only but the borrower can arrange for a valuation and pay it off, or make a part payment worth at least 10% of the property's value, at any time.

It has to be paid off in full by the end of the 25th year, if the property isn't sold before then.

In the meantime the increase in payments each year is likely to be relatively small, because it's a percentage increase on the interest charge, not in the interest rate, (if that makes sense):

Source

Thanks for the examples. Now I understand that it's actually a pretty good deal in terms of interest paid on that top up loan. 

Obviously the deal is only as good as the overall transaction, i.e. pretty bad considering developers would have just hiked the prices up for any slack HTB allowed).

[longgone]

http://www.dailymail.co.uk/money/mortgageshome/article-5469983/Families-sold-Help-Buy-mortgages-face-1-050-fee-hike.html

[suresh786]

10 hours ago, Neverwhere said:

It's interest only but the borrower can arrange for a valuation and pay it off, or make a part payment worth at least 10% of the property's value, at any time.

It has to be paid off in full by the end of the 25th year, if the property isn't sold before then.

In the meantime the increase in payments each year is likely to be relatively small, because it's a percentage increase on the interest charge, not in the interest rate, (if that makes sense):

Source

 

https://www.helptobuylondon.co.uk/docs/default-source/default-document-library/help-to-buy-london-brochure-spring-summer-2018.pdf?sfvrsn=2

 

Edited March 7, 2018 by suresh786

[suresh786]

Finally found one website showing the examples of how to calculate the fees

https://www.helptobuylondon.co.uk/docs/default-source/default-document-library/help-to-buy-london-brochure-spring-summer-2018.pdf?sfvrsn=2

[Fence]

15 hours ago, spyguy said:

Worse.

Overpay for new build. Discount the 10% new build premium and the 25% overpayment and that 25% help is look dubious.

Quite, "helping" who exactly?  More like HTS - Help To Sell! 

[Andy T]

15 hours ago, spyguy said:

Worse.

Overpay for new build. Discount the 10% new build premium and the 25% overpayment and that 25% help is look dubious.

Agree on the overpay, one of my relatives lives in an area where 1930's 3 bed semis are about 130k, a new development at the end of the same road - smaller 3 bed semis are around 200k on Help to Buy. Over 50% more expensive! they'll never maintain that premium over the larger older houses. I checked the sales data, looks like every one was purchased for the original listed price, I guess negotiating a discount is impossible with Help to Buy too.

[Andy T]

11 hours ago, Neverwhere said:

It's interest only but the borrower can arrange for a valuation and pay it off, or make a part payment worth at least 10% of the property's value, at any time.

It has to be paid off in full by the end of the 25th year, if the property isn't sold before then.

In the meantime the increase in payments each year is likely to be relatively small, because it's a percentage increase on the interest charge, not in the interest rate, (if that makes sense):

Source

Yeah that makes sense. Forgot that it's a 20% loan not 25%

So interest only but no repayment vehicle as such, unless buyer acquires a wedge of cash to put down. I guess for most it will just get absorbed by HPI after a long period of time, put to the back of the mind, ******ing expensive way to buy a house though and if they ever move there will be less equity carried forward, so next house purchase potentially needs a high LTV mortgage (maybe they'll come up with a 'Help' scheme for that)

[rantnrave]

At least one developer, Barratt, is trying to woo Help to Buy purchasers from five years ago into buying again on other developments through the same scheme.

Sales director Sara Parker said: “After five years, payments on the Help to Buy scheme start to incur interest but by moving home, and entering into a new Help to Buy arrangement, purchasers can have another five years interest free.”

http://www.propertyindustryeye.com/thousands-of-help-to-buy-purchasers-facing-ticking-time-bomb-in-loan-costs/

[Andy T]

11 minutes ago, rantnrave said:

At least one developer, Barratt, is trying to woo Help to Buy purchasers from five years ago into buying again on other developments through the same scheme.

Sales director Sara Parker said: “After five years, payments on the Help to Buy scheme start to incur interest but by moving home, and entering into a new Help to Buy arrangement, purchasers can have another five years interest free.”

http://www.propertyindustryeye.com/thousands-of-help-to-buy-purchasers-facing-ticking-time-bomb-in-loan-costs/

soon we'll be swopping our houses every 3 years just like moving debt around  on 0% credit cards to avoid paying interest

[Si1]

26 minutes ago, rantnrave said:

At least one developer, Barratt, is trying to woo Help to Buy purchasers from five years ago into buying again on other developments through the same scheme.

Sales director Sara Parker said: “After five years, payments on the Help to Buy scheme start to incur interest but by moving home, and entering into a new Help to Buy arrangement, purchasers can have another five years interest free.”

http://www.propertyindustryeye.com/thousands-of-help-to-buy-purchasers-facing-ticking-time-bomb-in-loan-costs/

Oh the joy of unintended consequences from economic f00kwittery. Well done George you tw8t.

[Fairyland]

27 minutes ago, Si1 said:

At least one developer, Barratt, is trying to woo Help to Buy purchasers from five years ago into buying again on other developments through the same scheme.

Sales director Sara Parker said: “After five years, payments on the Help to Buy scheme start to incur interest but by moving home, and entering into a new Help to Buy arrangement, purchasers can have another five years interest free.”

http://www.propertyindustryeye.com/thousands-of-help-to-buy-purchasers-facing-ticking-time-bomb-in-loan-costs/

But HTB(equity loan) is available only for new builds. Who will they sell their 5 year old houses to as old houses won't qualify for HTB? Genuine question.

Edited March 7, 2018 by Fairyland

[Fairyland]

8 hours ago, longgone said:

http://www.dailymail.co.uk/money/mortgageshome/article-5469983/Families-sold-Help-Buy-mortgages-face-1-050-fee-hike.html

Quote

The first swathe of buyers — thought to be around 2,000 borrowers — who took out Help to Buy loans five years ago will be hit with the extra charges from April.

It means that someone with a £300,000 property who took the 20 per cent loan would have to pay an extra £1,050 in the first year.

These charges will increase each year in line with the Retail Prices Index, plus 1 per cent.

 

Let me get this right. For a 20% equity loan of 60,000 the fees are:

April 2018 onwards, @1.75% = £1,050 per year

April 2019 onwards, @RPI + 1%  or 1.75 + RPI + 1% ?

Is average RPI usually in the 2 - 4% range? I can't find more information about this as google always comes up with CPI.

http://www.bbc.co.uk/news/business-41649498

Quote

Business rates will go up by September's Retail Prices Index (RPI) of 3.9%.

So if RPI is 3.9%, HTB fees will be at a rate of 3.9 +1 = 4.9%  minimum? So a £60,000 loan service cost would be an eye watering £2940 per year?

Some people I know have  more than £60,000 equity loan. And I don't know what will happen to those who have 40% equity loan in London.

Edited March 7, 2018 by Fairyland

[kibuc]

No, it's that initial charge that goes up by RPI + 1%. So, £1,050 in Year 1 becomes £1101 in Year 2 after 4.9% increase.

[Si1]

37 minutes ago, Fairyland said:

But HTB(equity loan) is available only for new builds. Who will they sell their 5 year old houses to as old houses won't qualify for HTB? Genuine question.

Ah. That'd require, I guess, 10% + 25% growth to cover it, over 5 years, that's 6% per year. Or 3% per year plus inflation. 

[Fairyland]

1 hour ago, kibuc said:

No, it's that initial charge that goes up by RPI + 1%. So, £1,050 in Year 1 becomes £1101 in Year 2 after 4.9% increase.

Thanks. That looks much more affordable.

Edited March 7, 2018 by Fairyland

[Fairyland]

56 minutes ago, Si1 said:

Ah. That'd require, I guess, 10% + 25% growth to cover it, over 5 years, that's 6% per year. Or 3% per year plus inflation. 

So what is the chance of a HTB owned home selling in the current climate?

[kibuc]

26 minutes ago, Fairyland said:

So what is the chance of a HTB owned home selling in the current climate?

It's a non-recourse loan, so I'd say selling would make a lot of sense when prices drop. Buy a £600k flat with £240k HTB, then a few years later swap it for a similar, but non-HTB eligible one at £350k. You end up with a similar property, 40% less debt and a clean slate as far as HTB loan is concerned.

[Si1]

30 minutes ago, Fairyland said:

So what is the chance of a HTB owned home selling in the current climate?

Pretty low without further govt props, I'd say

[Andy T]

55 minutes ago, kibuc said:

It's a non-recourse loan, so I'd say selling would make a lot of sense when prices drop. Buy a £600k flat with £240k HTB, then a few years later swap it for a similar, but non-HTB eligible one at £350k. You end up with a similar property, 40% less debt and a clean slate as far as HTB loan is concerned.

How do you swop a house? 

Think your missing your £30k deposit being wiped out

[kibuc]

4 minutes ago, Andy T said:

How do you swop a house? 

Think your missing your £30k deposit being wiped out

It would, but so would the £240k debt. Looks like a no-brainer, even with all the extra costs related to selling/buying/moving.