a few questions for you mortgage whizz kids out there
Discussion
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 to move out of home soon aswell so dont have a chance to develop a 20% deposit or even a 10% deposit come to think.
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.
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.
jamie128 said:
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?
Why would you not have paid any of the loan back? You can't choose whether or not to pay it. Unless you have £20k capital, and you intend to pay down the mortgage on day one. In which case, as you have said, you'd be a berk.jamie128 said:
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?
Why would you still owe on the loan? Generally these scheme loans are for a ten year term. Regardless, yes you would have to repay the loan on sale of the house, so you'd end up with 80%jamie128 said:
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?
Yes, but if the house has increased in value at the remortgage, the Firstbuy lender will take their share of that increase. Incidentally, you would own 100% of the house anyway (or insofar as you can given you own money on it) - you will have title even with the Firstbuy scheme.jamie128 said:
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?
Probably. It's up to the lender and your credit priofile though.I must admit I am little confused by the wording above, but will try and help if I can.
If you paid off £20,000 of the mortgage, you would have a mortgage of £50,000 against property of £80,000 (80% of the property). This gives you equity of £30,000 and the loan is repaid by the proceeds of the sale of their 20%.
If you had fully repaid the mortgage and the property was sold for £100,000, then you would receive £80,000. If you purchased another property for more than this then you would need either a mortgage or funds from another source to make up the difference.
You will have to check the terms and conditions of the scheme to see how you go about purchasing their share from them if this is possible. Even if it is, you may struggle to find a lender who would mortgage this for you as it would be a high loan to value ratio.
The lending criteria will be applied to your share of the property. In other words your loan to value ration will be worked on the basis of 80% of the property value. The best mortgage rates quite often go to people borrowing with a lower loan to value ratio but this will depend on the deals available at the time.
I should add that all of the above is said without knowing the exact details of your scheme/mortgage etc - so it may be wrong!
If you paid off £20,000 of the mortgage, you would have a mortgage of £50,000 against property of £80,000 (80% of the property). This gives you equity of £30,000 and the loan is repaid by the proceeds of the sale of their 20%.
If you had fully repaid the mortgage and the property was sold for £100,000, then you would receive £80,000. If you purchased another property for more than this then you would need either a mortgage or funds from another source to make up the difference.
You will have to check the terms and conditions of the scheme to see how you go about purchasing their share from them if this is possible. Even if it is, you may struggle to find a lender who would mortgage this for you as it would be a high loan to value ratio.
The lending criteria will be applied to your share of the property. In other words your loan to value ration will be worked on the basis of 80% of the property value. The best mortgage rates quite often go to people borrowing with a lower loan to value ratio but this will depend on the deals available at the time.
I should add that all of the above is said without knowing the exact details of your scheme/mortgage etc - so it may be wrong!
jamie128 said:
also im on fixed term for 3 years.
What happens if in 3 years my property has devalued? ive heard the banks loan you less? i dont get this, if you buy a house for 100,000 and need a 70000 mortgage, why would you start borrowing less? do you have the fund the amount it has dropped?
The idea behind these schemes is that the secondary lenders take a risk on future house prices. If your house loses money, the EasyStart lenders also lose out, as they still have 20% of the equity.What happens if in 3 years my property has devalued? ive heard the banks loan you less? i dont get this, if you buy a house for 100,000 and need a 70000 mortgage, why would you start borrowing less? do you have the fund the amount it has dropped?
The sometimes inequitable arrangement that the housebuilders have with the government are not your problem...
Doofus said:
The idea behind these schemes is that the secondary lenders take a risk on future house prices. If your house loses money, the EasyStart lenders also lose out, as they still have 20% of the equity.
The sometimes inequitable arrangement that the housebuilders have with the government are not your problem...
no i mean for the 70,000 i have to fund?The sometimes inequitable arrangement that the housebuilders have with the government are not your problem...
jamie128 said:
also im on fixed term for 3 years.
What happens if in 3 years my property has devalued? ive heard the banks loan you less? i dont get this, if you buy a house for 100,000 and need a 70000 mortgage, why would you start borrowing less? do you have the fund the amount it has dropped?
Lets keep it simple...What happens if in 3 years my property has devalued? ive heard the banks loan you less? i dont get this, if you buy a house for 100,000 and need a 70000 mortgage, why would you start borrowing less? do you have the fund the amount it has dropped?
£100k house, the bank wants a 20% deposit. This acts as a buffer for the value of house dropping below the amount they have lent you (with a conservative valuation as they will probably auction it).
If your house drops to £80k, they have no buffer against further devaluation/distressed sale.
They would most likely ask for additional cash from you to build this buffer back up or they will charge a punative interest rate.
The house being worth less than the outstanding mortgage is called negative equity.
Look up "margin call" and check the wording of your mortgage carefully.
IN a negative equity situation, you will also need permission from bank to sell as they will need to make arrangement for you to fund the shortfall.
jdw1234 said:
Lets keep it simple...
£100k house, the bank wants a 20% deposit. This acts as a buffer for the value of house dropping below the amount they have lent you (with a conservative valuation as they will probably auction it).
If your house drops to £80k, they have no buffer against further devaluation/distressed sale.
They would most likely ask for additional cash from you to build this buffer back up or they will charge a punative interest rate.
Not so. And unless I've misunderstood you, your last sentence there is bunkum. If the house devalues to 80%, the secondary lender still has 20% equity. So they've lost £4k. You, as the owner, still owe the full £70k to your primary lender, so you have £4k equity.£100k house, the bank wants a 20% deposit. This acts as a buffer for the value of house dropping below the amount they have lent you (with a conservative valuation as they will probably auction it).
If your house drops to £80k, they have no buffer against further devaluation/distressed sale.
They would most likely ask for additional cash from you to build this buffer back up or they will charge a punative interest rate.
Your primary lender (the mortgage comapny) lent you £70k. As long as you pay back £70k (plus interest), they're OK.
Your secondary lender (the EasyStart lender) lent you 20% of the value of the house, which happened to be £20k. As long as they get 20% of the proceeds of any sale (or the loan repaid plus interst), they're happy too.
The secondary lender risks losing some of their cash if the value drops. The primary lender doesn't (so much), as they will come after you for any shortfall should you sell for less than the outstanding primary mortgage.
Doofus said:
Not so. And unless I've misunderstood you, your last sentence there is bunkum. If the house devalues to 80%, the secondary lender still has 20% equity. So they've lost £4k. You, as the owner, still owe the full £70k to your primary lender, so you have £4k equity.
Your primary lender (the mortgage comapny) lent you £70k. As long as you pay back £70k (plus interest), they're OK.
Your secondary lender (the EasyStart lender) lent you 20% of the value of the house, which happened to be £20k. As long as they get 20% of the proceeds of any sale (or the loan repaid plus interst), they're happy too.
The secondary lender risks losing some of their cash if the value drops. The primary lender doesn't (so much), as they will come after you for any shortfall should you sell for less than the outstanding primary mortgage.
So i dont need to know about any devaluing unless i am planning on selling it?Your primary lender (the mortgage comapny) lent you £70k. As long as you pay back £70k (plus interest), they're OK.
Your secondary lender (the EasyStart lender) lent you 20% of the value of the house, which happened to be £20k. As long as they get 20% of the proceeds of any sale (or the loan repaid plus interst), they're happy too.
The secondary lender risks losing some of their cash if the value drops. The primary lender doesn't (so much), as they will come after you for any shortfall should you sell for less than the outstanding primary mortgage.
jamie128 said:
So i dont need to know about any devaluing unless i am planning on selling it?
In a nutshell.Having said which, whilst I am very familiar with a couple of these schemes (having been involved in their inception), I'm no longer involved, and I don't know the scheme to which you refer. However, these FTB schemes are all largely the same.
Doofus said:
Not so. And unless I've misunderstood you, your last sentence there is bunkum. If the house devalues to 80%, the secondary lender still has 20% equity. So they've lost £4k. You, as the owner, still owe the full £70k to your primary lender, so you have £4k equity.
Sorry if I'm misunderstanding, but I don't see the maths like that.Agree the secondary lender's share drops with value, so that would go to £16K. So if the house value is £80K, then the amount owing on it is £70K + £16K = £86K. The OP is in negative equity by £6K.
Over time though (about 4yrs without looking it up) he'd have paid about £6K off the mortgage, so he'd be approx even.
Deva Link said:
Sorry if I'm misunderstanding, but I don't see the maths like that.
Agree the secondary lender's share drops with value, so that would go to £16K. So if the house value is £80K, then the amount owing on it is £70K + £16K = £86K. The OP is in negative equity by £6K.
You're right, of course. I can;t add up... Agree the secondary lender's share drops with value, so that would go to £16K. So if the house value is £80K, then the amount owing on it is £70K + £16K = £86K. The OP is in negative equity by £6K.
Doofus said:
jdw1234 said:
Lets keep it simple...
£100k house, the bank wants a 20% deposit. This acts as a buffer for the value of house dropping below the amount they have lent you (with a conservative valuation as they will probably auction it).
If your house drops to £80k, they have no buffer against further devaluation/distressed sale.
They would most likely ask for additional cash from you to build this buffer back up or they will charge a punative interest rate.
Not so. And unless I've misunderstood you, your last sentence there is bunkum. If the house devalues to 80%, the secondary lender still has 20% equity. So they've lost £4k. You, as the owner, still owe the full £70k to your primary lender, so you have £4k equity.£100k house, the bank wants a 20% deposit. This acts as a buffer for the value of house dropping below the amount they have lent you (with a conservative valuation as they will probably auction it).
If your house drops to £80k, they have no buffer against further devaluation/distressed sale.
They would most likely ask for additional cash from you to build this buffer back up or they will charge a punative interest rate.
Your primary lender (the mortgage comapny) lent you £70k. As long as you pay back £70k (plus interest), they're OK.
Your secondary lender (the EasyStart lender) lent you 20% of the value of the house, which happened to be £20k. As long as they get 20% of the proceeds of any sale (or the loan repaid plus interst), they're happy too.
The secondary lender risks losing some of their cash if the value drops. The primary lender doesn't (so much), as they will come after you for any shortfall should you sell for less than the outstanding primary mortgage.
I was talking about a normal mortgage.
Good spot!!
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