Help to buy colleague

[Kosmin]

7 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.

Bit anecdotal mate.

[anonguest]

4 minutes ago, Kosmin said:

Bit anecdotal mate.

No, VERY anecdotal. He does say that it is based on HIS experience - rather than assert it as universal fact.  Of course IF his sampling size is large enough then it becomes less reasonable to dismiss it as anecdotal?

[adarmo]

8 hours ago, happyguy said:

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

+1  

[Smiley George]

5 hours 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 8th year the fee is 540.75 * 1.03 = 556.97

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

...

Interesting, thanks for the info.

So anyone who went balls deep in London up to the £600k limit with a £240k HTB contribution....is going to be looking for circa an additional £350 per month...and if interest rates do rise significantly, I wouldn't want to be in their shoes.

[Orb]

8 hours ago, Smiley George said:

Interesting, thanks for the info.

So anyone who went balls deep in London up to the £600k limit with a £240k HTB contribution....is going to be looking for circa an additional £350 per month...and if interest rates do rise significantly, I wouldn't want to be in their shoes.

If they haven't sold them to raise cash 

[Freki]

Btw, I remember vaguely an issue with remortgaging HTB homes. Banks did not seem to keen. Can someone refresh my memory?

[Assume The Opposite]

It's not only the loan costs that increase, but re-mortgaging options are limited too. With MMR they may face  tighter restrictions with paying the loan interest and not many lenders offering products. 

"Help To Buy homeowners who want to switch to a cheaper mortgage face long delays and hefty administration fees costing them hundreds of pounds"

"Homeowners may also find they have to pay large administration fees and that their choice of deals is very limited"

https://www.thisismoney.co.uk/money/mortgageshome/article-6232649/Hidden-catch-Help-Buy-Homeowners-face-mass-red-tape-remortgage.html

"And in some cases, borrowers may even find the lender they took out their original Help to Buy mortgage with, doesn’t offer remortgages under the scheme"

https://www.thesun.co.uk/money/5862012/thousands-of-help-to-buy-mortgage-borrowers-trapped-due-to-lack-of-choice-and-high-fees/

 

 

 

[Freki]

thanks, that's what I had in mind

[Monkey]

On 23/01/2019 at 08:22, Si1 said:

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%

Does the mean the RPI is compunded with the 1%,each year?

so saying RPI stays at 2% its actually then 3%

1.75

4.75

7.75

And so on

[Freki]

No someone displayed the math.

1.75(1+3%)^n with n the number of years of RPI at 2%

so on year 5 it means the rate will be 2.03%

on year 25 3.66%

[Trump Invective]

3 minutes ago, Monkey said:

 Does the mean the RPI is compunded with the 1%,each year?

so saying RPI stays at 2% its actually then 3%

1.75

4.75

7.75

And so on

Ooh that would be good!!

[frederico]

This was all done on the premise that house prices will continue to increase, If they don't everyone involved is screwed.

How come the people that run the country are so thick 

[Si1]

1 hour ago, Monkey said:

Does the mean the RPI is compunded with the 1%,each year?

so saying RPI stays at 2% its actually then 3%

1.75

4.75

7.75

And so on

No

[Aidan Ap Word]

3 hours ago, Freki said:

No someone displayed the math.

1.75(1+3%)^n with n the number of years of RPI at 2%

so on year 5 it means the rate will be 2.03%

on year 25 3.66%

So unless rates go down below this approx. 3% across the period - and assuming (!) you can get a mortgage - then it makes sense to pay this portion off last... Since normal retail rates for a functioning market are... What... 6%?

Except - just remembered - that when you do staircase they take a matching proportion of the capital gains (or losses!)... So the saving (lol) in the proportionately lower interest rate comes with matching "capital gains" risk. 

Edited January 24, 2019 by Aidan Ap Word
Just remembered

[lid]

So she has bought a 400k house on 30k wage? Marvellous ?

[user not found]

6 hours ago, lid said:

So she has bought a 400k house on 30k wage? Marvellous ?

And she's owned 3 properties previously... Yet still only scraped together a 5% deposit.

She did confirm to me she was unaware the £80k 25yr loan had to be paid back. 

[iamnumerate]

On 23/01/2019 at 08:22, 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/

Why would any politician want to create a time bomb like this?  Is Osborne a secret communist trying to destroy the UK economy and bring in a revolution in 20+ years

[iamnumerate]

10 hours ago, Sausage said:

And she's owned 3 properties previously... Yet still only scraped together a 5% deposit.

She did confirm to me she was unaware the £80k 25yr loan had to be paid back. 

HTB is only for FTB so how did she do that?

[Si1]

52 minutes ago, iamnumerate said:

HTB is only for FTB so how did she do that?

Not on a new build house it isn't.

[Si1]

54 minutes ago, iamnumerate said:

Why would any politician want to create a time bomb like this?  Is Osborne a secret communist trying to destroy the UK economy and bring in a revolution in 20+ years

Err, Gordon Brown? Before that Thatcher and selling off the council housing, demutualising the building societies. Some people say Winston Churchill's messing around with the gold standard led to the great depression and hence ww2.

Because they're politicians.

[iamnumerate]

1 minute ago, Si1 said:

Err, Gordon Brown? Before that Thatcher and selling off the council housing, demutualising the building societies. Some people say Winston Churchill's messing around with the gold standard led to the great depression and hence ww2.

Because they're politicians.

I am not sure about that.  I think that Thatcher really believed that selling off council housing was a good idea as well as popular.

Ditto Churchill with the Gold Standard.  Also I think Brown really thought that tax credits was a good idea (probably he didn't think that house prices would explode).

(BTW I didn't support either of Brown or Thatcher at the time and was not alive for Churchill)

However HTB seems so obviously bad it is hard to see how anyone could support it.  It makes almost all of other mess ups seem clever.

[user not found]

25 minutes ago, Si1 said:

Not on a new build house it isn't.

Indeed.

[Si1]

16 minutes ago, iamnumerate said:

 

However HTB seems so obviously bad it is hard to see how anyone could support it.  It makes almost all of other mess ups seem clever.

I find it difficult to disagree. I think that Brown (running a large deficit to bribe the public sector vote) and Churchill's fiddling were obvious to some. But yes HTB is more transparent still.

Edited January 25, 2019 by Si1

[modavid]

On 1/23/2019 at 7:39 AM, 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.

HTB is a ticking time bomb, the party lasts for 5 years and then BOOM!

Your colleague has a grand total of 3 options really -

1) You pay interest on government's HTB loan (1.75%, increasing by RPI + 1% every year)

2) Sell and repay the loan (assuming property prices go up)

3) Re-mortgage (this is getting more and more difficult though, she would lose the new-house premium so a much lower valuation)

[Dorkins]

2 hours ago, iamnumerate said:

Why would any politician want to create a time bomb like this?  Is Osborne a secret communist trying to destroy the UK economy and bring in a revolution in 20+ years

I think Osborne's plan was create a "nice little housing boom" 2012-2015, create a feelgood effect that would get the Conservatives back in power for another Parliament at GE2015, Cameron steps down around 12-18 months from the end of the Parliament and Osborne becomes PM, Osborne wins GE2020 and gets at least a Parliament in the top seat. Then the HTB toxic debt matures in the 2030s long after he retires.