Firstbuy first time buyer
Discussion
Step daughter and her husband are looking to buy a property via Firstbuy. I personally think the scheme does not set out to do what it is supposed to do, but that is for another thread.
I made them aware of the issues of paying over the top on the interest rate, and the chances of the market falling and negative equity with only a 5% stake etc, but they are adamant that they do not want to pay someone else's mortgage by renting. They are in it for the long game and want to get on the ladder. The 5% deposit, 20% government SE and 75% mortgage means it is affordable, whereas a 95% mortgage would not work on their income multiplier right now. 5 Years out should be ok to move on and get a proper mortgage (when the 20% falls due). So if they want in to property ownership, it seems to them that this is the way for them.
So, to the question. Nobody with any sense pays the asking price from a builder. When viewing a property development, they overheard the sales centre person tell another couple that the asking price of the property is "not negotiable under the Firstbuy scheme".
I would like to know, is this really a constraint of the scheme, or is it just some builder bulls
t Ts and Cs to enable a hard nose negotiation standpoint from a liar that I will then steamroller through (as usual)?
Many thanks in advance.
I made them aware of the issues of paying over the top on the interest rate, and the chances of the market falling and negative equity with only a 5% stake etc, but they are adamant that they do not want to pay someone else's mortgage by renting. They are in it for the long game and want to get on the ladder. The 5% deposit, 20% government SE and 75% mortgage means it is affordable, whereas a 95% mortgage would not work on their income multiplier right now. 5 Years out should be ok to move on and get a proper mortgage (when the 20% falls due). So if they want in to property ownership, it seems to them that this is the way for them.
So, to the question. Nobody with any sense pays the asking price from a builder. When viewing a property development, they overheard the sales centre person tell another couple that the asking price of the property is "not negotiable under the Firstbuy scheme".
I would like to know, is this really a constraint of the scheme, or is it just some builder bulls

Many thanks in advance.
Sorry don't know the officail answer to this but it has the wiff of "Gobermunt money up for grabs, double the price boys!" about it.
I would start with your first offer. When you get the non-negotiable reply then ask if this is company policy or a legal issue. And take it from there.
The only thing I can see is that there is a potential issue here with LTV's.
I would start with your first offer. When you get the non-negotiable reply then ask if this is company policy or a legal issue. And take it from there.
The only thing I can see is that there is a potential issue here with LTV's.
Before you go steamrollering anyone, you might want to get your facts straight.
The 20% Equity loan is split 50/50 between the Government & the builder.
Its interest free for 5 years, in year 6 interest is charged at 1.75% then its infaltion (no idea which measure they use, but I guess it would be RPI) + 1% thereafter.
The hombuilder is effectively underwriting the house purchase, they are also taking risk on the value of the property not falling (they will have 3rd charge I think over the home) as the value of the homebuy is linked to the value fo the house, it falls they get repaid less if the house is sold or repo'd. Its not a feature of the scheme that the price is non-negotiable, but it may of of that particular developers T&C's.
Have they checked they are eligible with your local Housing Association?
The 20% Equity loan is split 50/50 between the Government & the builder.
Its interest free for 5 years, in year 6 interest is charged at 1.75% then its infaltion (no idea which measure they use, but I guess it would be RPI) + 1% thereafter.
The hombuilder is effectively underwriting the house purchase, they are also taking risk on the value of the property not falling (they will have 3rd charge I think over the home) as the value of the homebuy is linked to the value fo the house, it falls they get repaid less if the house is sold or repo'd. Its not a feature of the scheme that the price is non-negotiable, but it may of of that particular developers T&C's.
Have they checked they are eligible with your local Housing Association?
scotal said:
Rude-boy said:
The only thing I can see is that there is a potential issue here with LTV's.
Why dat?scotal said:
Before you go steamrollering anyone, you might want to get your facts straight.
The 20% Equity loan is split 50/50 between the Government & the builder.
Its interest free for 5 years, in year 6 interest is charged at 1.75% then its infaltion (no idea which measure they use, but I guess it would be RPI) + 1% thereafter.
The hombuilder is effectively underwriting the house purchase, they are also taking risk on the value of the property not falling (they will have 3rd charge I think over the home) as the value of the homebuy is linked to the value fo the house, it falls they get repaid less if the house is sold or repo'd. Its not a feature of the scheme that the price is non-negotiable, but it may of of that particular developers T&C's.
Have they checked they are eligible with your local Housing Association?
Thanks for clearing that up.The 20% Equity loan is split 50/50 between the Government & the builder.
Its interest free for 5 years, in year 6 interest is charged at 1.75% then its infaltion (no idea which measure they use, but I guess it would be RPI) + 1% thereafter.
The hombuilder is effectively underwriting the house purchase, they are also taking risk on the value of the property not falling (they will have 3rd charge I think over the home) as the value of the homebuy is linked to the value fo the house, it falls they get repaid less if the house is sold or repo'd. Its not a feature of the scheme that the price is non-negotiable, but it may of of that particular developers T&C's.
Have they checked they are eligible with your local Housing Association?
I am fully aware of the scheme makeup between builder and government, and the rates after 5 years. I was just not particularly wanting to discuss the detailed ups and downs of the scheme, just the question on asking price, which I can only see in many builders Ts and Cs and not in any Firstbuy paperwork - which you have confirmed is builder specific (most of them by the look of it searching for "Firstbuy AND full asking price" on Google).
Perhaps housebuilders should remember that without this scheme, the builder would be tied up with not building on land, sites running on long, empty, unsold built "affordable" apartments for far longer (once you have sold one, the whole block needs to be finished). So I can also see return value to their underwriting of the scheme for getting their low end plots sold quickly (my source for the "can't get off site" issue is a site manager).
But of course they want it both ways as usual. Lets face it, if you are a builder, and the government is delivering a ready stream of mortgage approved buyers to your development, would you maybe up the asking prices a little to cover your stake, or lower them? To then say that the arbitrary price that they set is not negotiable is pushing it a bit far IMO when every other buyer has the chance to negotiate. The builder has not met me, so I am gonna test the water and stroll in as a ready to go BTL buyer and see what I can do on the price on this particular site.
Since you raise the detail of the scheme, IMO it seems to be designed to address two things - from the government perspective, maintaining artificially high house prices, and the house building trade (not the housing market) and now the banks have jumped on the bandwagon with higher interest rates for the buyers on the scheme (yeah, risk blah blah but remember it is 75% of supposed house value), I just wondered whether it really was policy, or just a builder trying to reclaim some of his 10%. Only the buyer is paying over the odds for it - their benefit is that they can get
To answer your question, yes it has been confirmed that they are eligible for the scheme (under 60k joint income etc), and they meet the income multiplier for the advance required, and have ample deposit requirements for the mortgage application.
LTV - well that depends on the real valuation of the property, rather than the builder's arbitrary number doesn't it?
Rude-boy said:
SeeFive said:
LTV - well that depends on the real valuation of the property, rather than the builder's arbitrary number doesn't it?

Maybe the nod is given on firstbuy applications that they have a 25% cushion (as opposed to a 5 % cushion.
- ETA that particular lender doesn't appear to offer firstbuy mortgages.
Edited by scotal on Wednesday 24th August 16:37
scotal said:
Rude-boy said:
SeeFive said:
LTV - well that depends on the real valuation of the property, rather than the builder's arbitrary number doesn't it?

Maybe the nod is given on firstbuy applications that they have a 25% cushion (as opposed to a 5 % cushion.
- ETA that particular lender doesn't appear to offer firstbuy mortgages.
Edited by scotal on Wednesday 24th August 16:37
I have made absolutely sure that the kids know the advantages they are getting (new home now rather than saving for another year to get to a bigger deposit or renting, 80% exposure to crash rather than 100%, sizeable interest free loan for 5 years, reduced mortgage and deposit needs now, new house with new fittings etc) compared to getting ripped off by the builder (asking price only Ts and Cs), having to buy a new house (new house size premium on price), stuffed by banks on interest rate, negative equity day 1 etc, they still want to do it compared to renting.
Their view is that they would rather work hard to mitigate the risk of ownership failure than rent. To be fair they will do this easily.
They have got married, saved their deposit and fees, got some spare cash, bought a 5k car, had a holiday in Turkey all in one year. Also, if they rented for a year, they see that as 10-12k that they cannot save going into someone else's pocket, and it would not be helping them in their goal. They have a very long term view and regard their house as a home rather than in investment, and are seemingly happy to be ripped off by builders and banks in order to start that early.
Guess I had better keep an eye open for a mortgage product swap as soon as their salaries support a 100% purchase at a 3X multiplier. But of course it has to be approved by the other charges on the property, and the LTV must stack up at that point in time... Oh! we are back to that asking price validity issue again...
jdw1234 said:
Are these homebuy house not going to turn into unsellable slums after a few years when the council tennants move in next door?
And wont their implied values decrease when they homebuy scheme is ended?
Homebuy is on normal developments, so there is no more risk of that than any other new build. It wont make any difference to the secondary market value becuase tis only open to new homes, soi they can't be sold on. And wont their implied values decrease when they homebuy scheme is ended?
Well, I have to wind my neck in a little on the banks after some considerable research.
75% LTV, income multiplier ok for loan (could have had another 30k), no debt at all, so a pretty ideal candidate within the scheme. Halifax came up with a 4.09 fixed for 5 years with a 499 fee. So not so bad after all, but still bit worse than someone could get outside the scheme of course.
Everything ok verbally. Paperwork from the scheme should be through very soon to cover the new value of property, so then the fun starts with the builder to get the "incentives" that will be negotiated if they refuse to negotiate on asking price off the sheet (affecting valuation and LTV = needs to be solved with cash) and implemented as gifts.
Oh Joy...
75% LTV, income multiplier ok for loan (could have had another 30k), no debt at all, so a pretty ideal candidate within the scheme. Halifax came up with a 4.09 fixed for 5 years with a 499 fee. So not so bad after all, but still bit worse than someone could get outside the scheme of course.
Everything ok verbally. Paperwork from the scheme should be through very soon to cover the new value of property, so then the fun starts with the builder to get the "incentives" that will be negotiated if they refuse to negotiate on asking price off the sheet (affecting valuation and LTV = needs to be solved with cash) and implemented as gifts.
Oh Joy...
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