# Help to Buy or Not Mortgage help??



## danwel (Feb 18, 2007)

Right i will try to put you in the situation so that you know where i am at.

I have found a house that i intend to buy and the value of the house is 230,000 and is brand new if that makes any difference.

I then intend to spend 10,000 on extras such as kitchen upgrade, wardrobes and outside tap etc.

Now my problem lies as to what mortgage to go and get. I can get a normal straight repayment mortgage with a 10% deposit which i have and the repayments will be around 1100 a month.

Now my dliemma is that the financial advisor i spoke to has suggested to me the help to buy scheme where the goverment essentially own 20% of my house by buying into it. Now there are no charges on this or even repayments on the first five years so it is effectively an interest free loan for 5 years and after 5 years i pay them back. However i still have to pay them 20% of the overall value of my house so if my house has increased in value i pay and increased amount back so that is relavtive i guess. So for 5 years my mortgage payments will be around the 700 mark as oppose to the 1100 mark on a straight repayment.

now as my house will be new and will increase as typically even when the rest of the country isn't doing so well my town (Whitby) is so for it to increase in value of 10-14% wouldn't be unheard of if the news is to be believed too.

My head is spinning with figures and should i shouldn't i decisions. and whilst initially it seems great of a 5 year interest free loan and as long as you pay it back quickly you won't incur too many costs.

Am i being daft in not seeing this for what it is or am i looking a gift horse in the mouth as part of me is saying that if you can afford a repayment mortgage then why go for the help to buy???

Thanks in advance


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## empsburna (Apr 5, 2006)

How much is the new house premium round your way? 20%?

What do similar houses go for?

IMHO Go for the straight up repayment mortgage.


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## Kerr (Mar 27, 2012)

With interest rates so low, you want to pay off as much as quickly as you can.


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## Bero (Mar 9, 2008)

Nobody can predict house prices.
They don't always go up.
In 5 years if the price has spiked you will have to pay a lot more for your 20%....if they have dipped you will score.

Having said that if you can afford it (which i'm guessing you can from the way you ask) I would definitely own 100% of the house from the outset.


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## danwel (Feb 18, 2007)

Another curve ball is that a 10% deposit gets me an ok rate but by choosing the the government scheme it allows me access to better rates as they class their 20% as a deposit too!!!

No idea what the new house premium is round my way but my new house is well priced as even the estate agent commented on that


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## Geordieexile (May 21, 2013)

Can't you use the £400 a month saving to start chipping away at the 20% whilst there's no interest on it? That way, when the 5 years is up you can still access the better rates if value has gone up and you've had 5 years of paying no interest on 20% of the debt. You then make a decision as to whether you want it all on the mortgage or it's more favourable to pay at the govt rate.


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## m1pui (Jul 24, 2009)

empsburna said:


> How much is the new house premium round your way? 20%?


Look into this. A lot of new build prices are artificially increased to take into account the government incentives and when all comes to all you can easily find that the valuation a few years down the line falls short. I know of two friends who are approaching the 5 year deadlines for the schemes they signed up for and as the estates they moved into have expanded, the selling prices have dropped a bit.


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## Geordieexile (May 21, 2013)

I should clarify that I meant over payment on the mortgage there!


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## danwel (Feb 18, 2007)

Geordieexile said:


> Can't you use the £400 a month saving to start chipping away at the 20% whilst there's no interest on it? That way, when the 5 years is up you can still access the better rates if value has gone up and you've had 5 years of paying no interest on 20% of the debt. You then make a decision as to whether you want it all on the mortgage or it's more favourable to pay at the govt rate.


That would be my plan. To basically put the difference into an isa or the likes so in 5 years time I'd possibly have say 30k to instantly pay of their 20% which would be 46,000 plus any increase in house value.

It may well be that this is a great deal don't get me wrong and I'm looking at the fact their share will increase when really I should also be looking at the fact that ther share actually allows me to save 1-2% on my actual morgage APR over say 5 years

Just generally when things soound too good to be true they usually are lol


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## Geordieexile (May 21, 2013)

£400 over 60 months is £24k.

It's up to 20% you can take. However, you can play another tune on the figures: work out the threshold for getting the lower APR for the mortgage and see what the difference is there.
Also, it could be worth viewing it as a way of deferring payments for 5 years until you are in a better position. The fees will rise quite quickly if you aren't paying anything off at the 5 year point and are based on the price of the property rather than the outstanding loan too so be careful.


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## danwel (Feb 18, 2007)

Geordieexile said:


> £400 over 60 months is £24k.
> 
> It's up to 20% you can take. However, you can play another tune on the figures: work out the threshold for getting the lower APR for the mortgage and see what the difference is there.
> Also, it could be worth viewing it as a way of deferring payments for 5 years until you are in a better position. The fees will rise quite quickly if you aren't paying anything off at the 5 year point and are based on the price of the property rather than the outstanding loan too so be careful.


I was hoping to save 30k minimum that's where I plucked the figure from. Having looked at the future costs its 1.75% on their 20% for year 6 plus a 700 quid fee then each year is an extra 1% plus 700 fee so the costs can soon rise like you say. And yeah their 20% is on property value rather than initial 20%


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## Andyg_TSi (Sep 6, 2013)

Dont spunk the 10k on extras, put it into the deposit, put a bigger deposit down & therefore get access yourself to a better rate up front what saving you make on the 1100 per month by virtue of a bigger deposit and better rate save up.

What you were going to spunk 10k on at the outset you can get later on. An outside tap is peanuts in relative terms to fit
whats wrong with some ikea wardrobes for now and the standard kitchen.....

there going to charge you an exorbitant amount for 'upgrades' that you dont really need....yes you may 'want' them...but the key argument here is getting the lowest rate possible for your monthly mortgage payment without being in hook to the government wanting their pound of flesh in 5 years time


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## danwel (Feb 18, 2007)

10 k extras are:

3200 kitchen upgrades including fridge/freezer and dish washer
2500 carpets and flooring(need this anyway)
3000-4000 wardrobes(built in)
400 towel rails x 2


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## djgregory (Apr 2, 2013)

Getting ripped off there ^^


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## danwel (Feb 18, 2007)

djgregory said:


> Getting ripped off there ^^


On what part?? Genuinely interested i'm not being cheeky.

The towel rails i can possilby do without as i could probably do it cheaper at a later date.

Carpets i think are pretty much on the money. Wardrobes are the built in fitted type and they may well be slightly cheaper but not 100% until i have an appointment Saturday.

Kitchen upgrades....Not so sure on that in all honesty, Think fridge/freezer is 600 and the dishwasher is 500 so could possibly save cash on that.

The plus point in going through Barratts is they are covered by their guarantee rather than the standard manufacturer gurantee.

Genuinely interested in peoples comments as this is my first new build well in fact only the second house i have ever bought


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## robertdon777 (Nov 3, 2005)

Take the 20% option

Over pay your mortgage by £400 a month for 5 years. (Worth about 30+k including interest)

Risk is if the house prices goes up say 50% in 5 years because then you will need to pay 30k back and be no better off.


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## 20vKarlos (Aug 8, 2009)

I guess the other Question you need to ask yourself, is 

"do you want the worry that the 20% you pay back might be more than you want to pay them or more than you can afford??"


Robertdon777 - if he Overpays his mortgage, assuming he hasn't got a "serious" income (100K +) where does that 30K come from?

That's a genuine question as I'm not sure


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## danwel (Feb 18, 2007)

robertdon777 said:


> Take the 20% option
> 
> Over pay your mortgage by £400 a month for 5 years. (Worth about 30+k including interest)
> 
> Risk is if the house prices goes up say 50% in 5 years because then you will need to pay 30k back and be no better off.


Right if i am reading this right then if i take the 20% option and if i over pay my mortgage i am probably making a double saving on the interest then if my understanding is correct.

Then at the 5 year point i would have to re value my house and then remortgage in order to buy the government out??


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## Andyg_TSi (Sep 6, 2013)

danwel said:


> 10 k extras are:
> 
> 3200 kitchen upgrades including fridge/freezer and dish washer
> 2500 carpets and flooring(need this anyway)
> ...


Go price up all the kitchen appliances as seperate purchaces what exactly are you getting for the 3200 quoted cost.

Take all the room measurements to carpet right (or similar) and get a price

you're getting **** raped on the fitted wardrobes there imho. Buy some free standing ones for now

as you said yourself, get the towel rails later on

your getting charged an extra premium for them supplying and fitting everything.

all im saying is think smart and dont get ripped off, because imho you are


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## Fuzz573 (Sep 18, 2013)

Haggle more with the builders, all the builders I have spoken to over the years were offering to throw in the floor coverings to get the sale, it's probably a different market where you are but nobody really pays the asking price for new builds here, they are always inflated, check out zoopla sold prices to check the sold prices of the others houses in the estates surrounding


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## Andyg_TSi (Sep 6, 2013)

20vKarlos said:


> I guess the other Question you need to ask yourself, is
> 
> "do you want the worry that the 20% you pay back might be more than you want to pay them or more than you can afford??"
> 
> ...


I think hes making the saving of 30K with reference to;

A. Paying an extra 400 a month off the Capital figure borrowed and

B. The intetest 'saved' on that 400 a month.

think about it...

He'll be paying 4,800 a year extra off the capital borrowed, so thats 4800 at the end of the 1st year that wont be attracting interest in the 2nd year.....so on & so forth.

I think he should actually see a small reduction in the mothly payments (if interest rates dont rise) due to how compound interest is calculated.


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## danwel (Feb 18, 2007)

Andyg_TSi said:


> I think hes making the saving of 30K with reference to;
> 
> A. Paying an extra 400 a month off the Capital figure borrowed and
> 
> ...


Now that makes more sense to me lol

So rather than me putting the extra into say an ISA would i be better off like you say over paying my mortgage so that i will save of the capital interest on my mortgage as a whole?

It's all very complicated in my head but some of the questions and answers in here are really starting to make sense now and whilst i know deep down i will only get the exact answers on friday when i meet with my financial advisor but i need to be armed with questions i need answers too which onrdinarily i may not have thought of


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## empsburna (Apr 5, 2006)

danwel said:


> Now that makes more sense to me lol
> 
> So rather than me putting the extra into say an ISA would i be better off like you say over paying my mortgage so that i will save of the capital interest on my mortgage as a whole?
> 
> It's all very complicated in my head but some of the questions and answers in here are really starting to make sense now and whilst i know deep down i will only get the exact answers on friday when i meet with my financial advisor but i need to be armed with questions i need answers too which onrdinarily i may not have thought of


If only we could have a crystal ball


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## danwel (Feb 18, 2007)

empsburna said:


> If only we could have a crystal ball


Yeah i know lol, was just thinking out aloud. Got to be honest i never thought it would be this complicated as it wasn't first time round but that said i think it is down to me wanting to understand more this time and find a way that my money/payments work best for me


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## PaulN (Jan 17, 2008)

As soon as i saw the government quote i shuddered. If you can avoid it i would at all costs.

Firstly can you afford the £1100 plus running costs? id guess another £500 a month for gas/elec, water, Council Tax, Phone, sky...

Id also say £10k isnt enough to kit out a house fully.... 

So if you cant afford £1590-1600 a month just to run the house id say look at a different house.


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## Andyg_TSi (Sep 6, 2013)

danwel said:


> Now that makes more sense to me lol
> 
> So rather than me putting the extra into say an ISA would i be better off like you say over paying my mortgage so that i will save of the capital interest on my mortgage as a whole?
> 
> It's all very complicated in my head but some of the questions and answers in here are really starting to make sense now and whilst i know deep down i will only get the exact answers on friday when i meet with my financial advisor but i need to be armed with questions i need answers too which onrdinarily i may not have thought of


Correct mate.

I beleive compound interest is calculated on a mothly basis, so the less you owe the less tbere is to charge interest on.

over 5 years paying an extra 400 a month is 4800 a year x 5 = 24000 extra paid off over 5 years + the Iinterest you wont be paying on each payment of 400

if you interest rate on the mortgage is higher than the interest received on the isa you are better off overpaying the mortgage


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## Andyg_TSi (Sep 6, 2013)

In fact with saving interest rates so low, it makes sense to use any savings to pay down or pay off debts that you are paying interest on.

eg. Its a waste of time having 1k sat in a bank account earning 0.1% interest while at tbe same time having a 1k balance on a store or credit card charging you 24%

Pay off the credit card


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## danwel (Feb 18, 2007)

PaulN said:


> As soon as i saw the government quote i shuddered. If you can avoid it i would at all costs.
> 
> Firstly can you afford the £1100 plus running costs? id guess another £500 a month for gas/elec, water, Council Tax, Phone, sky...
> 
> ...


The 10k isn't to kit out the house it is just to "upgrade" the initial houe purchase with extras.

There are no issues with affording to run the house as i have the salary to cope with that.

My questions are based around trying to save on capital interest. If the house prices increase say and i owe the governement an extra 10k then that's fine but if by taking their scheme i have saved 30k in the 5 years then it is a no brainer but if i have only saved 5k then that changes it


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## danwel (Feb 18, 2007)

Please find below quotes applicable to the purchase from Barratt Homes at £239,995 STC.

If you were to purchase the property linked to Help to Buy with a 5% deposit you could port your existing mortgage with Nationwide.
Porting £146,480 at 2.5% and taking the additional borrowing of £33,515 linked to a 2 year fixed rate at 2.84% will we calculate incur you in a monthly payment of £717.20 over 30 years.

If you wished to stay away from help to Buy and commit a 10% deposit from your own resources we would need to look to another lender as Nationwide would require a minimum of a 15% deposit. We could look to the Clydesdale Bank and their 2 year fixed rate at 3.99% at 90% you would be borrowing £215,995 which over 30 years would incur a monthly payment of £1,029.09.

Ok that's my options, any ideas??


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## robertdon777 (Nov 3, 2005)

Option 2 as its only £300 more.

The risk isn't worth it, if the gap had been £400-£500 (so you made those overpayments) then yes it would be worth it.

£300 more is an overpayment of £3600 x 5 = £18000 + as mentioned the additional off as interest which would probably be about £5K or so, so about £23K saved. The problem I can see is that the house will rise in price over the next 5 years too much to make the benefit of taking the Government loan and overpaying worth it. You could end up a few grand better off but the risk isn't worth it.

If you had taken it out 5 years ago you would be quids in, hindsight is great.


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## Andyg_TSi (Sep 6, 2013)

Just one other thing,

Have you considered an 'offset' mortgage?

this is where you have a savings account linked to your mortgage, the benefit being that you offset the amount in the savings account against the mortgage for interest purposes

EG if you had 10K in the savings account, you wouldn't earn any interest on that savings, but you wouldn't be charged interest on £10K of the mortgage.

so you could borrow 'say' £160K, but only be charged/paying interest on £150K

Doing this saves you money on the monthly figure and if you overpay on your mortgage too, you'll save even more


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