# Help to Buy - how does it work?



## hotwaxxx (Jul 12, 2007)

As DW is the fountain of all knowledge and helped me numerous times in the past, I thought I'd post a question.

My wife and I are looking to buy our first house. The property is a new build and costs £165k in total. 

My father is ready to sell one of his properties and has kindly offered the full proceeds of his property to go towards our new house. He expects to sell the property for £115k. My wife and I can then put in a further £25k which means we have to make up the remaining £25k through a mortgage. 

Now with the right to buy scheme, can we expect the government to hand us over the £25k interest free for 5 years or does it not work like that?


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## matt-rudd (Jan 4, 2015)

They will fund 20% of a "mortgage" on a house interest free for 5 years so if you required a £25k mortgage they would lend you £5k at 0% if I understand it correctly. Currently having the pain of buying a house where the previous owners bought via the scheme and the government are requesting 2 valuations on the house as it has "lost" £10k in 6 months.


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## hotwaxxx (Jul 12, 2007)

matt-rudd said:


> They will fund 20% of a "mortgage" on a house interest free for 5 years so if you required a £25k mortgage they would lend you £5k at 0% if I understand it correctly. Currently having the pain of buying a house where the previous owners bought via the scheme and the government are requesting 2 valuations on the house as it has "lost" £10k in 6 months.


Okay. So it is 20% of any mortgage?

That makes sense I guess. So £5k will be interest free for 5 years but the remaining £20k will be from a bank and will accrue interest then.


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## matt-rudd (Jan 4, 2015)

Now that I don't know, I guess if it's a new build I would have thought it wouldn't matter on the percentage of a mortgage but I will happily be corrected or do a little search about that. 

If they will do it for such a small mortgage yes that's how it will work. £20k bank funded with interested (1.9-2%) and £5k from the government at 0%


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## matt-rudd (Jan 4, 2015)

From what I can see is the following:

Property is valued at less than £600k

You must have access to a minimum 5% deposit

The property purchased must be your only residence. Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase.

It doesn't mention a maximum to your deposit only a minimum


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## hotwaxxx (Jul 12, 2007)

matt-rudd said:


> From what I can see is the following:
> 
> Property is valued at less than £600k
> 
> ...


Oh thanks for that.

I'll do a little more research but its not very clear when you have more capital in the first instance. I'm not overly fussed if I don't use the rent to buy but every bit helps at the end of the day and even £5k interest free is a help.


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## horico (Jul 17, 2010)

On such a low amount it's unlikely to be worth it. For instance, if your hoise was 100k, Help to buy would be for 20% or 20k. The important bit is that after the 5 years, if the house has increased to 120k, you pay back 24k, not 20k. 

AFAIK, the HTB is based on the house purchase price, not the mortgage amount. It was created to allow you to obtain a 75% ltv mortgage with only a 5% deposit.

You need to do specific sums for your situation...


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## Andyg_TSi (Sep 6, 2013)

Don't think help to buy is your best option here.

Your looking at a £165k house & will have a total of £140k deposit, leaving you needing £25k.

Bear in mind some lenders have a minimum amount they'll lend, they may refuse you a £25K loan on a mortgage because your not borrowing enough.
Hell.....you could take out a personal loan for that amount rather than a mortgage.

For me, in that position, either

1. Leave the £25K in the bank & borrow £45K on a mortgage. You'll then have a nest egg in case of emergencies or if you want to move again/make house improvements.

2. Find a better, more expensive house, meaning you'll need to borrow a bit more.


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## Kerr (Mar 27, 2012)

I can't help but think you'll be better with a mortgage and pay it off as quickly as possible. 

If you choose a property wisely, £25,000 could rise quite significantly if the house prices pick up, as you have to pay the government the same percentage of price increase. 

If you leave that £25,000 outstanding for too long, it could be a lot more. 

£25,000 is a tiny mortgage and if you've got a target, you'll pay it off quicker than leaving £25,000 debt lurking in the background.


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## ron burgandy (Apr 18, 2007)

I'd defiantly buy a bigger house


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## J306TD (May 19, 2008)

ron burgandy said:


> I'd defiantly buy a bigger house


What about a garage??


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