As you know we’ve been saving to buy a house, we’d saved 10% which was pretty good going but when speaking to the Mortgage advisor we found out that many banks actually require 15% deposit on a new build house and 25% deposit on a new build flat.
Some banks will offer 90% mortgages but the rates are higher or other offers (such as fixed term periods) are lower.
We opted to use Help To Buy Wales, here is our experience.
What is it?
This is a scheme where you borrow up to 20% of the property price from the government, essentially they purchase up to 20% of your house and you pay them back.
You still need the minimum of 5% deposit, but with the 20% loan you only need a 75% mortgage – this actually opens up better mortgage deals as the lender has less risk invested in the property.
Not all houses/developments qualify, plus other criteria such as affordability need to be met, but it is open to everyone. This scheme is the Welsh version, but there are versions in both England and Scotland – their criteria is slightly different.
Repaying put simply.
No repayments for the first 5 years except the admin fee (£1 per month, yes £1) then in year 6 you start paying interest repayments on the amount borrowed – you receive your own personal calculated payment plan.
This is 1.75% per annum, then each year the interest rate will be determined by RPI + 1%.
The loan must be repaid within 25 years of if you sell the house, which ever comes first.
If you sell.
The government get their % back based on market value. The % stays the same, but the amount could vary as such –
So if you bought a 100K house and borrowed 20K (20%) and sold it for 100K, you’d pay back 20K (20%).
If you sold it for 150K, you’d pay back 30K (20%).
But if the house value went the other way and it was only sold for 80K, then you’d pay back 16K (20%).
The house is still yours, you still pay your mortgage, you still maintain all aspects of the property (insurance, utilities, council tax, cutting the grass etc) – it is your house, just with a second charge (investment/interest) in the property (the first charge is the mortgage lender).
It’s that simple!
Now don’t get this mixed up with Help to Buy offered by some housing associations, they have very different terms and work in different ways. If in doubt, consult a qualified financial advisor.
Help To Buy Wales – http://helptobuywales.co.uk/