firstbuy scheme questions

[jamie128]

I know its not a great scheme, but the monthly payment is so much cheaper than renting and over time it will work out better than renting.

I have a few questions to ask.

I have a 100,000 pound house, minus 5000 from the builder as an incentive and minus 5000 for my deposit. So the property stands at 90,000, then with the firstbuy scheme it loans you 20% so i essentially get a 70% mortgage (If i paid it off but didnt pay the loan back i would own 80% of the house).

Question 1: If i had paid £20,000 off my mortgage but hadent paid any of the loan back and my house is still worth 100,000 pounds, would i basically have NO money whatsoever to take into another property?

If i pay my mortgage off in 25 years and i sell the house still owing on the loan, would i basically get 80,000 pounds (or 80% of the property) to carry over to a new mortgage?

Can i remortgage and ask to include the loan, i.e. the bank pay my loan off and i pay more monthly for the house so that i can own 100% of the house?

When i come to remortgage in 3 years after my fixed rate is finished will i get good deals as i only need to mortgage 70% of the property? or will this make it harder for me to get a good APR?

Thank you for your time.

[Stupeo]

With the FirstBuy scheme you own 100% of your house.

I was looking at this over the weekend for a house near me. Basically, you get 10% deposit from Government and 10% from the property developer. The idea is, after 5 years you start paying either the loan off or loan and interest?

[jamie128]

Stupeo said:

With the FirstBuy scheme you own 100% of your house.

I was looking at this over the weekend for a house near me. Basically, you get 10% deposit from Government and 10% from the property developer. The idea is, after 5 years you start paying either the loan off or loan and interest?

you have the oppertunity to own 100% of your house, (if you can scrape together 20% of the value of your property and just pay it off in a lump sum)

You start paying interest on the loan after 5 years, you dont pay off any capital off it, you have to save up that on your own and either pay it off after 25 years, pay it off when you sell the house or get the money together yourself which i can imagine will be pretty damn hard

[Stupeo]

Sorry, you are right! I wasn't very clear in my first post..

[Deva Link]

Presumeably you've read through the buyers guide? http://www.homesandcommunities.co.uk/sites/default...

[jamie128]

Deva Link said:

Presumeably you've read through the buyers guide? http://www.homesandcommunities.co.uk/sites/default...

I have now.

Im still confused though, if i didnt pay the equity loan back at one point would i start having money to carry over into a new mortgage if the house prices increased by 2% each year as stated in the document?

Also when it says i pay 1.75% of the equity loan per year which increases by 1% each year, what kind of extra monthly payments will that work out as?, in 10 years could i be paying a substancial amount of money per month just to pay the interest on the equity loan?

[jamie128]

From what ive worked out.

The equity loan is 20,000, at year 5 i pay 29 a month in interest, then the next year i pay 45 a month interest, that shoots up mega fast :/, this is providing the RPI doesent increases aswell.

fk lol

[jamie128]

jamie128 said:

From what ive worked out.

The equity loan is 20,000, at year 5 i pay 29 a month in interest, then the next year i pay 45 a month interest, that shoots up mega fast :/, this is providing the RPI doesent increases aswell.

fk lol

i must of worked this out wrong as on the document it states 40,000 equity loan would cost 58 in the first year of interest then 62 in the second year, i must be overcalculating it somehow?

[Deva Link]

There's a chart on page 13 which gives an example - just half the numbers for £20K. That charge estimates that RPI will be 5%.

You'd be best talking to a mortgage broker who has some experience of this scheme. Try PMing Scotal or Sarnie.

[jamie128]

Deva Link said:

There's a chart on page 13 which gives an example - just half the numbers for £20K. That charge estimates that RPI will be 5%.

You'd be best talking to a mortgage broker who has some experience of this scheme. Try PMing Scotal or Sarnie.

yeh i see that now, so if property prices rise by 5% each year, and i dont pay back the equity loan, how long will i have to be paying the mortgage off for before i start to see any sort of profit to take over into a new home? just a rough guess?

[jdw1234]

jamie128 said:

Deva Link said:

There's a chart on page 13 which gives an example - just half the numbers for £20K. That charge estimates that RPI will be 5%.

You'd be best talking to a mortgage broker who has some experience of this scheme. Try PMing Scotal or Sarnie.

yeh i see that now, so if property prices rise by 5% each year, and i dont pay back the equity loan, how long will i have to be paying the mortgage off for before i start to see any sort of profit to take over into a new home? just a rough guess?

Would you consider buying a 3 year old house identical to this one (therefore it does not qualify for the scheme) for a 15% premium?

If the answer is no, why would anyone else do the same when you look to sell.

Also, factor in risk of the surrounding houses being used for social housing.

Just a few risks for you to think about.

[jamie128]

jdw1234 said:

Would you consider buying a 3 year old house identical to this one (therefore it does not qualify for the scheme) for a 15% premium?

If the answer is no, why would anyone else do the same when you look to sell.

Also, factor in risk of the surrounding houses being used for social housing.

Just a few risks for you to think about.

I dont get you on the first bit at all, do you mean would i pay 115000 for the same house in 3 years time? well most likely yes because all of the house prices will have gome up and this will still be one of the more affordable ones??


The surrounding houses are detatched, the council housing part of the estate is quite far away from my bit, in a completely different cul de sac

[Deva Link]

jamie128 said:

yeh i see that now, so if property prices rise by 5% each year, and i dont pay back the equity loan, how long will i have to be paying the mortgage off for before i start to see any sort of profit to take over into a new home? just a rough guess?

5% is likely to be a heck of a stretch. But let's say the value of your nominally £100K house does increase by 5% per year - if you ignore compounding effects to keep the maths simple then in 5 yrs it'll be worth £125K.

My (very, very quick) read of the guidance is that you have to give the lender of the £20K the same increase. So you'd have to give them £25K (£20K + 25%) when you sell. So if you sell for £125K, give £25K back, you'd have £100K left with a £70K mortgage.

Note again: I'm not any kind of professional advisor. Take proper advice.

[jamie128]

Deva Link said:

5% is likely to be a heck of a stretch. But let's say the value of your nominally £100K house does increase by 5% per year - if you ignore compounding effects to keep the maths simple then in 5 yrs it'll be worth £125K.

My (very, very quick) read of the guidance is that you have to give the lender of the £20K the same increase. So you'd have to give them £25K (£20K + 25%) when you sell. So if you sell for £125K, give £25K back, you'd have £100K left with a £70K mortgage.

Note again: I'm not any kind of professional advisor. Take proper advice.

in other words after 5 years, if house prices do increase 5% each year, then im left with 30,000 to put into a new house? or im left with nothing?

[bobbylondonuk]

From what I know after speaking to a couple of new home sellers...

First you have to be eligible for first buy scheme
Second the Loan by the developer is a % of the price of the house, int free for 5 years and then the int rate ramps up quickly.
third..if you sell up, you will be paying the original % of the price back! And I think it goes the same way whenever you pay it back after the first 5 years!

Please check the finer details on this.

[Deva Link]

jamie128 said:

in other words after 5 years, if house prices do increase 5% each year, then im left with 30,000 to put into a new house? or im left with nothing?

You're left with £30K. £5K of that was your deposit in the first place. £5K was given to you by the builder.

If your £70K mortgage was a normal repayment mortgage then you would have paid some of the £70K off after 5yrs, probably aroundabout £8K, so you'd only actually owe £62K.

[jamie128]

Deva Link said:

You're left with £30K. £5K of that was your deposit in the first place. £5K was given to you by the builder.

If your £70K mortgage was a normal repayment mortgage then you would have paid some of the £70K off after 5yrs, probably aroundabout £8K, so you'd only actually owe £62K.

ah well thats not as bad as i thought then, still made profit.

But you say 10000 is off me and the builder, but i only pay 8000 back over the 5 years so the other 12000 is profit essentially?

[jdw1234]

jamie128 said:

jdw1234 said:

Would you consider buying a 3 year old house identical to this one (therefore it does not qualify for the scheme) for a 15% premium?

If the answer is no, why would anyone else do the same when you look to sell.

Also, factor in risk of the surrounding houses being used for social housing.

Just a few risks for you to think about.

I dont get you on the first bit at all, do you mean would i pay 115000 for the same house in 3 years time? well most likely yes because all of the house prices will have gome up and this will still be one of the more affordable ones??


The surrounding houses are detatched, the council housing part of the estate is quite far away from my bit, in a completely different cul de sac

I'm saying, maybe the house is only worth £100k because of this funny scheme. It is purely a gimmick for a builder to shift the house.

Without the scheme (which I assume is only available on new houses) I don't get why you are assuming a 5% annual growth.

[Deva Link]

jamie128 said:

ah well thats not as bad as i thought then, still made profit.

To say you're jumping the gun, by talking about profit, would be a mssive understatement. Don't bank on anything happening other than it being a place to live for a similar cost to renting.

jamie128 said:

But you say 10000 is off me and the builder, but i only pay 8000 back over the 5 years so the other 12000 is profit essentially?

You've losing me. The £8000 is the approx amount you would pay off your £70K mortgage over 5 yrs. On a repayment type of mortgage, you pay interest and a small amount of the principal (the £70K) off every month. So the principal owed reduces over time. After (typically) 25 years, you've paid it all off.

Unless you make arrangements to pay it off, you still owe the £20K (increased by any percentage increase in the house value) Firstbuy loan. In your example, if you sell after 5 years at £125K then £25K is kept to pay that loan off.

[jamie128]

jdw1234 said:

I'm saying, maybe the house is only worth £100k because of this funny scheme. It is purely a gimmick for a builder to shift the house.

Without the scheme (which I assume is only available on new houses) I don't get why you are assuming a 5% annual growth.

so my house costs 100,000 but is worth less than that? that makes no sense whatsoever, what about the people who have bought the exact same style of house through a traditional mortgage, they still pay the same price.

Im not assuming that, just what the document ESTIMATES, and yes im just going on a estimate at the moment, nothing is guaranteed,