Buying First House Questions


(Brexit Day Is Gonna Be Shamayzing.) #42

I was just wondering how far back into your history so I know what documents I’d need etc.

If it’s 3 months then cool


#43

When you come to pay it off, you will need to pay back 20% of the current cost.

Now, the confusing thing is you’ll actually have 2 valuations.

  1. The mortgage company will have their own valuation (ideally, you’d like this to be as high as possible).

  2. The HtB scheme requires a RICS certified valuation - This is what determines the 20% (ideally, you want this as low as possible).


(Michael) #44

They own 20% of the house. So if the price goes up, they get more money (still 20%), if it goes down, they lose out (but they still get 20%).


#45

Also, don’t forget you’ll have to pay around £6-800 just to close the HtB process (when you come to pay it off).

£200 HtB admin fee (lol)
£300 Solicitor fee
£300 RICS valuation fee

The last 2 are rough estimates - Cost will be dependant on where you live.


(Jordan) #46

Thanks @nickh and @michaelw90

This is the only bit that sort of deters me from doing it as it isn’t then really linked to how much you borrowed but how much inflation/ house prices increase.

It just becomes a bit messy if in 5 years you want to pay of say the £20k you borrowed and its suddenly £25k+.


#47

We did it, purely because we didn’t have the time to save the 50/60K for the deposit.

Effectively, we got the house of our dreams at the time we wanted, but knew it would cause a few more complications down the line.


(Michael) #48

I don’t see it as that personally. I bought a 200k house, so borrowed 40k. I’ll probably be owing them 50k when I’m looking to pay it off on a 250k house. The small cost (10k + ~1k in actual costs) means that I end up ~40k up – also, I’ve been able to get a nicer house that at that point in time I wouldn’t have probably been able to get a deposit together for.

Personally I think it’s a no-brainer.


#49

Also, for anyone reading and thinking about doing it (or already part way though), it might be a good idea to time the end of the 5 years with the end of your mortgage product.

Ultimately, when you come to pay it off, you’ll be taking out another mortgage effectively (you can’t simply “add” to your existing account).

If you opt for a mortgage with a fee (which makes sense, because the interest rates are so low, you might as well just add the fee to the mortgage), you’ll end up paying the fee only once (even though you have 2 mortgages), providing they are done at the same time.

This means you’ll need to do a 2 year mortgage followed by a 3 year one (or the other way around).

If you do a 2 year followed by another 2 year, followed by another 2 year, you’ll end up either having to take a new mortgage out half way through that last term - Or you’ll pay the interest on the HtB portion (which you don’t want to do).

Alternatively, you can pay off the HtB after year 4.

You’ll forfeit a years worth of interest free, but ultimately, if your house price increases anyway, the chances are you’ll have to pay more back due to the 20%, than you would do on the interest in year 5 (assuming you paid off the HtB).

That probably makes no sense to people… I am in the throws of sorting it out myself, so it’s all fresh in the mind!


(Jordan) #50

I definitely see the benefits, its just sort of throwing caution to the wind on the house price increase. No doubt the RICS guys who value for HtB will value on the higher end so no love gained there.

Like for example, over the last 5 years over the whole of the UK it looks like house prices have increased by 30% - so it isn’t an inconsequential amount of money - and that’s if you pay it off before the interest starts to accrue.

I might just need to look into the numbers a bit more when I get round to looking at buying a property - for me I think it would just expedite the process rather than me sitting and waiting to amass the deposit.

But thanks for your insights - I think its much more helpful to get personal opinions on stuff like this.


(Jordan) #51

Thinking about it more, I think its mainly designed to be used to buy a first house, sit on it for a few years and then flip or change product, otherwise you’d lose a significant amount of money in the equity if you held on to it for the life of say a 25 year mortgage.


#52

So, it’s definitely not designed for that.

You would want to pay it off within the 5 years (by remortgaging), or at worst, 6/7 years (having paid the interest element only for 1 or 2 years).

Anything longer and it becomes unsustainable.


(Michael) #53

Absolutely, a lot of people shouldn’t leave it till they pay the interest.

I’ve gone for 2 x 2 year fixed. It expires end of this year, so will be paying off the HtB, and increasing my mortgage. My LTV will probably fall compared to if it I keep it so I’ll end up paying more per month, but I’ll own the house.

That LTV after 4 years is lower than the LTV than originally. I think I worked out it’d be something like 70% LTV, vs 75% originally. So yea, I lose a bit, but after 4 years, I’m on a lower LTV, got a nice house, and have only had to (originally) put in 10k of my own money.


#54

For what it’s worth, the RICS valuations I’ve seen have all been lower than the Mortgage company.

A neighbour had their house valued by Nationwide at £400,000, and the RICS valuer came in at £370,000.

This gave them a much better Loan to Value ratio which put them on a better rate.


((╯°□°)╯︵ ┻━┻) #55

I sold my house that was purchased on the HtB scheme 2 weeks ago. Everything that has been said above is accurate.

I had my house for 5 years when I came to sell it and the RICS valuation valued it at the same price that I paid for it. So they got back what they lent me :smiley: I guess it depends on how long you plan on being there and what the market is like, but I didn’t expect to make any profit.

You pick a RICS valuation person and arrange it yourself, so I suppose you could try another one if you get a low valuation?

This is true also. RICS was £250 for me and the solicitor fees you would be paying anyway because no doubt they will be handling the purchase of your new property so you can get a “package deal” kind of thing.

After all of this I still had paid plenty of equity but be warned the payback process for the HtB scheme is lengthy.

If you want to know anything else just let me know :slight_smile:


#56

I thought if you sold it, you just paid 20% of the sale price?

Also, if you aren’t selling, but adding the 20% to your mortgage (so you own the house outright), you’ll want a low RICS valuation, as this determines the 20% you need to pay back.


((╯°□°)╯︵ ┻━┻) #57

Nope. They want 20% of the current market value or the 20% that they lent you - whichever is greater. So greedy :angry:

That’s why it’s even more frustrating that you have to pay for your a valuation on your own house so that they can tell you how much they want.


#58

Well, I never knew that.

Out of curiosity, was your valuation less or more than you sold it for?


((╯°□°)╯︵ ┻━┻) #59

Here is the redemption process. It’s quite simple but takes a lot of time for them to process each step.

In step 1 of the table it says the following:

In the case of a house sale the repayment sum is based on the market valuation or the
sales price (the higher of the two). You must be able to clear any arrears on the account
by the defined completion date or liaise with us directly to arrange payment. You will be
required to pay any interest payments due from the last payment made to the agree
completion date.


((╯°□°)╯︵ ┻━┻) #60

:wink:


#61

So not add the help to buy loan to a new mortgage - unless the new mortgage rate is lower interest than your help to buy loan.