An Insight Into The Help To Buy Scheme | Mortgage & Protection Podcast

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Podcast Transcript

Alex:
Hello, and welcome back to the Mortgage and Protection Podcast. And this week we’re going to be talking about the Help to Buy scheme, and I’ve got Haley from the Mortgage Store here with me. Hayley, how are you doing today?

Hayley:
Hi Alex. I’m good, thanks. How are you?

Alex:
Brilliant, thank you. Thanks for spending your time with us. So I wanted to ask a few questions on Help to Buy, if I can, if you’re alright with that.

Hayley:
Yeah, of course.

Alex:
So, first one I guess is, what makes you qualify for Help to Buy?

Hayley:
At the moment is available for first time buyers and home movers. The scheme is changing from the 1st of April next year. So as of then, it’ll only be available for first time buyers. So any home movers need to get in there quick basically. But yeah, as long as you’re a first time buyer you don’t own another… Sorry, let we start again.

Alex:
Yeah, no, that’s fine. Okay, Hayley, so what would make me qualify for the Help to Buy?

Hayley:
So, if you’re a first time buyer or a home mover buying a brand new property, and the price limit is $600,000. So the property can’t be more than $600,000. And as long as you don’t own another property on completion of the new property, then that’s your main criteria. The scheme is changing as of April next year, and it will then be only available for first time buyers, but up until then, is available for home movers as well.

Alex:
Okay, excellent. And anyone sort of listening back later on, by next year, we mean 2021. So it’s April, 2021, right, that, that change happens?

Hayley:
Yeah.

Alex:
Yeah, okay, excellent. I thought if you half answered this, with the property values, but how much can I borrow on Help to Buy?

Hayley:
So the maximum property limit is $600,000. In London, you can borrow 40% from the government, outside London, you can borrow 20%. So you can borrow 4.5 times of your income as the mortgage, but up to 75% of the property value on the mortgage.

Alex:
If I want to put more than 5% deposit down, can I do that?

Hayley:
Yeah, definitely. So minimum is 5%. You have to have 5% of your own deposit as a maximum of 55%. So anywhere between 5% and 55% of the property value as your deposit.

Alex:
What happens after that initial five years, with the Help to Buy?

Hayley:
So for five years, you haven’t got to worry about it. You’ve got five years interest free. The only thing you will pay for the first five years is a 1 pound a month admin fee. And then after five years, if you do nothing, in the sixth year, you’ll start to pay interest on the equity value. So that will start at 1.75% of the original equity loan amount you borrowed from the government, and that will creep up each year. So the interest rate will go up by 1% each year, plus, if the retail price index changes. And what a lot of people plan to do is pay the Help to Buy off earlier, or after that five years, so they don’t have to pay the interest for too long, or at all.

Alex:
I was going to say, I was just kind of a thinking, if I wanted to pay earlier, before that five-year where I’m not paying interest, can I do that?

Hayley:
Yeah, absolutely. So there’s fees involved to pay the Help to Buy off early, but you can do so at any point. So you don’t have to wait for the five years. What a lot of people do, is do it by remortgaging. So, if it’s affordable, and the bank will lend you enough, the property’s still worth enough, et cetera, you can try and borrow more money from the bank, to then pay the government off. You can’t pay off in small stages. It has to be either in one lot of 20%, or in 10%s. You can do it in one part or two parts.

Alex:
And then after that five years then, if I’m repaying that’s basically just the same as a normal mortgage, in terms of, I’ll have my set monthly repayments.

Hayley:
So, if you paid off the Help to Buy-

Alex:
Or if I do nothing, just say that I didn’t pay any off extra, and that five-year hits, I start paying interest. That’s just like a normal mortgage, right? Will I get a letter or something, notifying me how to repay the rest, yeah?

Hayley:
Yes. So when we apply for the Help to Buy loan, you do fill in a direct debit form. So that direct debit form is for the bank details, if you do start to pay the interest in year six, if you haven’t paid it off by then. But yeah, they will write to you. And then since the first year, you’ll know what you’re paying. And then if you still haven’t paid it off, it will go up a little bit the next year.

Alex:
How long is the process? How long would it take me to get approved?

Hayley:
We’d help you deal with the forms. Average is about five working days, but can take a little bit longer, depending on how busy they are, but shouldn’t be any more than five, six days are normal times.

Alex:
And why would a Help to Buy be declined?

Hayley:
There isn’t really many reasons why it would decline. As long as your broker has done the job properly to start with. We would check your affordability, check how much you can borrow with Help to Buy. We’ve got a copy of a Help to Buy calculator so we can see how much you’re eligible to borrow from the banks. And then as long as we’ve put those figures in correct, they’re the figures that we send off to Help to Buy, they’ll do their checks their end, and then it should come back fine. So as long as it’s been worked out properly from the start, there isn’t really any reason why that would come back declined.

Alex:
I think we mostly answered this question earlier, but how long is the scheme available to first time buyers, do you know?

Hayley:
So first time buyers, the schemes available till March, 2023. It is changing as of April, next year, so April, 2021, where there will be regional price caps. So depending on what area of the country you’re in, there’ll be a maximum property price and maximum price. So for example, London will still be $600,000, but different areas of the country will have different price caps.

Alex:
And is Help to Buy only available for new builds?

Hayley:
Yes, it is. Yes. So it’s only available on brand new properties, and it has to be with a participating developer, but they all advertise if they do the Help to Buy scheme. Most of your big developers can do the Help to Buy.

Alex:
I think we’ve answered to all the most… All right, so I picked out the most commonly googled questions about Help to Buy, but are there any things that come up in conversations where people may be… Are there things that people don’t know, they don’t know? So, they potentially wouldn’t come up on a Google search, if that makes sense. Is there anything else we kind of need to think about, if this is on our radar.

Hayley:
Not that I can think of. And the only things that sometimes, people will ask us is, about the 20%, because the 20% does fluctuate. So for example, if you decide you want to pay the Help to Buy back after the five years interest free, you’ll need to get a new valuation on the property. And then that value will determine how much you owe Help to Buy. So it might be higher, it might be lower. It depends on what the value of the property is at the time.

Alex:
And when’s a good time to speak to a broker about it? Do I need to go and find a property first, or is it best to come to you guys immediately to see what the affordability is like?

Hayley:
I would say to always come to us first, before you go out looking at property. So then we can establish your budget, because your budget using the Help to Buy scheme will be different than your budget if you were buying a pre owned property. And so it’s best to have a look, we establish your Help to Buy budget, and then you can go out looking at property. It’s just so that you know what you can afford.

Alex:
Brilliant, Hayley. I suppose, one thing I ask is, why do you do what you do? And I suppose I haven’t really asked how, is Help to Buy one of your main focuses and I guess, as well, how long have you been doing it for?

Hayley:
I’ve been brokering for quite a long time now, for seven, eight years, I think, maybe a little bit longer. But I’ve been working with just new builds for just under a year. It’s nice working with new builds. It’s busy, a lot of people, and up sizing or buying their dream home, and it’s nice to then get to see people when they finally get the keys to their new home.

Alex:
Hayley, that’s been amazing. Thank you so much. In 10 minutes, or less than 10 minutes, I think we’ve covered off everything about Help to Buy. So thank you so much for that. And we’ll definitely speak to you soon.

Hayley:
Thanks Alex.

Alex:
Brilliant. Cheers, bye, bye.

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