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Help to buy colleague

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A colleague has a HTB property, loan reps due in June 19.

She said she will never be asked to pay off the 20% loan until she dies: don't you have to pay it back when the mortgage ends?

She says the repayments are only £80 a month. Won't they rise every year?

She's on appprox £30k, 45, grown up kid. No hope of a husband or promotion or payrise (trust me on this!).

She's been trying to talk me into HTB since she bought the property.

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How does the Help to Buy equity loan work?

There are a few things that you need to understand about how the Help to Buy equity loan works:

  • You borrow a percentage of your home’s value, not a fixed amount
  • If your home increases in value, so does the amount that you owe – the same is also true if the value falls
  • You’ll need to pay a £1 management fee every month until the loan is repaid
  • The first five years of the Help to Buy equity loan is interest-free
  • After the interest-free years, you’ll be charged 1.75% on the outstanding amount as interest. This fee will increase each year by RPI plus 1%
  • You only repay the interest, not the equity. If you want to make a dent in the amount you owe, you need to make ‘staircasing repayments’, outlined below
  • You don’t have to repay the equity until you sell your home, or you reach 25 years (whichever is earlier)

From

 

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/help-to-buy/

Edited by Si1

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I forsee lots of htb houses being sold simply to cover the equity loan repayment, starting in 20 years time.

This fits in with my view that the 2030s will represent a long wave housing market bottom.

Edited by Si1

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Most people in my real world experience once they’ve “bought” a house then try and convince others to do the same. Herd mentality in my humblest.

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3 minutes ago, thewig said:

Most people in my real world experience once they’ve “bought” a house then try and convince others to do the same. Herd mentality in my humblest.

Probably the nervous excitement of the novelty - "I can put shelves where the hell I want to - now i just have to decide where!! This feeling is better than the birth of my firstborn - you need a piece of this action!!"

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8 minutes ago, thewig said:

Most people in my real world experience once they’ve “bought” a house then try and convince others to do the same. Herd mentality in my humblest.

To be fair it is much the same her with people who have not bought telling others not to buy

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I've just let my colleague know that either she saves up to pay off the loan (£80k in her case) during her mortgage term, or sells the house at the end of the mtg term. She says she's already skint even though the interest payments not started yet.

She isn't the sharpest tool in the box. She admitted she's relying on finding a rich boyfriend.

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3 minutes ago, Sausage said:

.

She isn't the sharpest tool in the box. She admitted she's relying on finding a rich boyfriend.

Is she a dosbod?

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14 minutes ago, Sausage said:

I've just let my colleague know that either she saves up to pay off the loan (£80k in her case) during her mortgage term, or sells the house at the end of the mtg term. She says she's already skint even though the interest payments not started yet.

She isn't the sharpest tool in the box. She admitted she's relying on finding a rich boyfriend.

Stupid, reckless and dishonest - where do I sign up!

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1 hour ago, chronyx said:

Stupid, reckless and dishonest - where do I sign up!

Try your local Tory constituency party.

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3 hours ago, Si1 said:

How does the Help to Buy equity loan work?

....

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/help-to-buy/

Sounds suspiciously like student loan debt. one day a letter will drop through the letterbox with an astronomical amount on it. And people typically say 'i'll never earn enough / never have to repay' then life will happen and they will have to address this issue.

After the interest-free years, you’ll be charged 1.75% on the outstanding amount as interest. This fee will increase each year by RPI plus 1%

If interest rates stay low for the next couple of decades, or even go lower (anything could happen) then 1% over RPI seems like it could be quite a ratchet to increase the debt.

This cohort of homeowners will expect a govt policy to come along in 20 years and bail them out. Extend loans for another 20 years, repay loans from your estate on death, interest free loan extensions, debt jubilee loan write offs etc etc. 

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2 hours ago, thewig said:

Most people in my real world experience once they’ve “bought” a house then try and convince others to do the same. Herd mentality in my humblest.

Same when people get married.

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4 hours ago, Sausage said:

A colleague has a HTB property, loan reps due in June 19.

She said she will never be asked to pay off the 20% loan until she dies: don't you have to pay it back when the mortgage ends?

She says the repayments are only £80 a month. Won't they rise every year?

She's on appprox £30k, 45, grown up kid. No hope of a husband or promotion or payrise (trust me on this!).

She's been trying to talk me into HTB since she bought the property.

The HTB loan bit is brutal. The cost ratchets up after the 5 year freeby.

You should onyl take out HTB if you can afford the house without.

If not you are fked.

 

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2 hours ago, regprentice said:

Sounds suspiciously like student loan debt. one day a letter will drop through the letterbox with an astronomical amount on it. And people typically say 'i'll never earn enough / never have to repay' then life will happen and they will have to address this issue.

After the interest-free years, you’ll be charged 1.75% on the outstanding amount as interest. This fee will increase each year by RPI plus 1%

If interest rates stay low for the next couple of decades, or even go lower (anything could happen) then 1% over RPI seems like it could be quite a ratchet to increase the debt.

This cohort of homeowners will expect a govt policy to come along in 20 years and bail them out. Extend loans for another 20 years, repay loans from your estate on death, interest free loan extensions, debt jubilee loan write offs etc etc. 

So the "fee" starts at 1.75% of the HTB portion. . Easier to "see" the impact when you make the 1.75 a concrete number (established when the mortgage starts at year 0, of course).

So for a house at 150k, and HTB at 30k (20%) - the fee paid at the start of year 6 as a concrete figures is 525 GBP (1.75% of 30k is). Or 43.75 per month (to help your friend with monthly budgets :)).

And then the fee goes up by RPI + 1% every year. So if we keep it simple and guess that RPI will be stable at 2% across the following years (never going to happen) then:

For the 7th year the fee is 525.00 * 1.03 = 540.75

For the 8th year the fee is 540.75 * 1.03 = 556.97

For the 9th year the fee is 556.97 * 1.03 = 573.68

...

Edited by Aidan Ap Word
Fix the 7th/8th/9th titles in the illustration.

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4 hours ago, Si1 said:

 

You don’t have to repay the equity until you sell your home, or you reach 25 years (whichever is earlier)

 

Governments will possibly waiver or change this clause. 

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5 hours ago, Sausage said:

A colleague has a HTB property, loan reps due in June 19.

She said she will never be asked to pay off the 20% loan until she dies: don't you have to pay it back when the mortgage ends?

She says the repayments are only £80 a month. Won't they rise every year?

She's on appprox £30k, 45, grown up kid. No hope of a husband or promotion or payrise (trust me on this!).

She's been trying to talk me into HTB since she bought the property.

please explain ? does she belong in the deluded old scrappers thread which sadly has not been updated in a while. 

can you get a sneaky photo of the wench ?

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1 hour ago, Aidan Ap Word said:

So the "fee" starts at 1.75% of the HTB portion. . Easier to "see" the impact when you make the 1.75 a concrete number (established when the mortgage starts at year 0, of course).

So for a house at 150k, and HTB at 30k (20%) - the fee paid at the start of year 6 as a concrete figures is 525 GBP (1.75% of 30k is). Or 43.75 per month (to help your friend with monthly budgets :)).

And then the fee goes up by RPI + 1% every year. So if we keep it simple and guess that RPI will be stable at 2% across the following years (never going to happen) then:

For the 7th year the fee is 525.00 * 1.03 = 540.75

For the 7th year the fee is 540.75 * 1.03 = 556.97

For the 7th year the fee is 556.97 * 1.03 = 573.68

...

The 1% above RPI is the damage...so after 25 years the repayments will be 27% higher in real terms, if I have worked this out right...

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6 hours ago, Si1 said:

How does the Help to Buy equity loan work?

There are a few things that you need to understand about how the Help to Buy equity loan works:

  • [...]
  • You don’t have to repay the equity until you sell your home, or you reach 25 years (whichever is earlier)

From

 

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/help-to-buy/

 

2 hours ago, lombardo said:

Governments will possibly waiver or change this clause. 

Yes, that's true. A great prop for the market would be to issue all HTB mortgage holders relief on the HTB portion of their purchase.

And - in underlying your point - 25 years is a very long time politically - the govt at this time (or before) could be even more bullish ion house prices and pumping asset prices generally.

Seeing all the pumping post 2007 and pretty much every 2 years since ... I wouldn't be surprised if the government pumps like mad to stem the current slowdown in prices return to rampant vote buying HPI.

 

59 minutes ago, Wayward said:

The 1% above RPI is the damage...so after 25 years the repayments will be 27% higher in real terms, if I have worked this out right...

I think this increase in fee by RPI is to protect the governments "cash" they stumped up.

And the +1% on top is to slowly "make a profit" or slowly encourage folks to get a mortgage from somewhere/someone else.

 

... in summary: price ramping remains rampant.

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6 hours ago, Si1 said:

How does the Help to Buy equity loan work?

There are a few things that you need to understand about how the Help to Buy equity loan works:

  • You borrow a percentage of your home’s value, not a fixed amount
  • If your home increases in value, so does the amount that you owe – the same is also true if the value falls
  • You’ll need to pay a £1 management fee every month until the loan is repaid
  • The first five years of the Help to Buy equity loan is interest-free
  • After the interest-free years, you’ll be charged 1.75% on the outstanding amount as interest. This fee will increase each year by RPI plus 1%
  • You only repay the interest, not the equity. If you want to make a dent in the amount you owe, you need to make ‘staircasing repayments’, outlined below
  • You don’t have to repay the equity until you sell your home, or you reach 25 years (whichever is earlier)

From

 

https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/help-to-buy/

To note, the 25 year repayment period is extended to 35 years if you have a 35 year mortgage. 

The repayment interest it set from the amount you very first take out, not 20% of the value at the present. With slowly the interest will build, no doubt the £80 a month interest will likely hit about £100 a month by year 25. It looks like it's going to trickle up very slowly.

Edited by Scramz

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5 hours ago, chronyx said:

Stupid, reckless and dishonest - where do I sign up!

also 45, and with a kid. You're gonna have to fight me for her!

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4 minutes ago, Orb said:

also 45, and with a kid. You're gonna have to fight me for her!

Think of the tax credits...

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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