[Finance] Help to Buy

[North East Seagull]

Morning all,

Do we have any Help to Buy experts in residence?

I am trying to (roughly) estimate the total cost of final repayment for a HTB loan taken out by a family member 9 years ago, so they can assess whether the cash offer the have received is high enough to be able to accept. I have had a good look on t'internet and can only find what appear to be calculators for monthly repayments should someone be looking to use HTB now. I think we have/can get all the relevant information needed: valuation, purchase price, principle borrowed via HTB, length of loan etc. but I simply cannot find out how the final repayment amount is calculated.

Any assistance the sages of NSC can offer would be very much appreciated.

 

[Springal]

Can’t the lender tell you ? Or has there been no annual statements ?

 

[Paulie Gualtieri]

Morning all,

Do we have any Help to Buy experts in residence?

I am trying to (roughly) estimate the total cost of final repayment for a HTB loan taken out by a family member 9 years ago, so they can assess whether the cash offer the have received is high enough to be able to accept. I have had a good look on t'internet and can only find what appear to be calculators for monthly repayments should someone be looking to use HTB now. I think we have/can get all the relevant information needed: valuation, purchase price, principle borrowed via HTB, length of loan etc. but I simply cannot find out how the final repayment amount is calculated.

Any assistance the sages of NSC can offer would be very much appreciated.

Having used the product in the past happy to help, would need to know though location and administrator to the scheme (probably a firm called Target)

They would need a HTB specific valuation to calculate their current share before a redemption statement can be produced

Will need legals as well to remove charge

Process took me 5 weeks to complete

Also to add, 9’years in i am assuming they are paying marginal interest now and want this sorted before year 10 where the interest doubled to c3.75%

 

[North East Seagull]

Thanks Paulie.

The property is in England, outside London. Not sure who the administrator is. One of the problems is that they do not really want to pay for an approved survey just go get a settlement figure (in order to assess the suitability of the offer) and then have to do another one because unlikely to be able to settle within the 3 month survey validity period (assuming it is still 3 months). They need to sell before they can settle the HTB loan. This is why I was hoping to be able to get/create some kind of estimator based on what the survey valuation is likely to be (based on estate agent valuations etc).

Some basic questions I was trying to get answered are things like: Is the final settlement based solely on the difference between the property purchase price and the approved valuation (unless the price realised is greater than the valuation - unlikely in this case)? How does the amount borrowed under HTB affect things, is this where the interest accrued comes into play (I am reading 1.75% after the 5 year interest free period, seen nothing about the % increase after 10 years)? Is this interest compounded, if so monthly, annually etc?

All I bit complicated for me!!

 

[Kosh]

We recently paid off our HTB loan via a re-mortgage redemption. The process is deliberately complex and onerous, HTB is frankly a licence to print money for both the government, financial advisors and conveyancers. It should NEVER have been permitted to happen as innumerate home 'owners' will soon find the loan interest repayments, particularly as they rise incrementally and rather steeply from year 5 onwards, utterly unaffordable - especially given the current economic climate.

That all said, we did manage to crowbar our way out of it, via employing a trusted FA and a conveyancer with HTB redemption experience. We were fortunate that our home had significantly increased in value (the Alnwick market has been ridiculous for some years), thus allowing us to 'release' our equity to pay off the HTB loan element and consolidate the balance into a new mortgage - whereby we're at least chipping away at the loan rather than simply paying off interest at an increasing rate.

My understanding is this, if you purchased at £220,000 and your HTB was £44000 (or 20% of the total value) your house was then valued at £250,000 (via, as others have said, a RICS cert valuation), you'd owe HTB 20% of this price: £50000 + any owed interest and other fees.

If your example is in the northeast, please feel free to PM me and I'll put you in touch with the FA we employed to 'manage' the process for us... Without him we'd have probably ended up going completely insane.

Useful link:

https://www.gov.uk/help-to-buy-equity-loan

Confirms my figures as above

A wee bit around the interest figures:

After 5 years, interest is charged on the government’s share of the HTB loan:

"The loan from the government now attracts an annual fee of 1.75% of the government’s share at the start. In future years, the fee will increase by RPI + 1% each year. You can think of the fee as being the interest you now need to pay on the government share."

Here's a working example:

Help to Buy Interest Rate Calculation

The following is how your help to buy interest rate will be calculated:

Years 1-5: 0%

Year 6: 1.75%

Year 7: 1.75% + RPI + 1%

Help to buy loan amount:
£ 44,000.00

Current inflation rate?
9

Year 6 monthly payments:
£ 64.17
Year 7 monthly payments:
£ 69.30

Remember - these fees do not go towards paying off the actual loan.

Hope all of that helps

 

[North East Seagull]

Hi Kosh,
Alnwick eh, I know it (quite) well. In fact, I am wondering if you are chap I saw, and complimented on your Seagulls T-shirt, outside the former Co-op on Bondgate Within a few months ago. I totally agree about HTB, it was/is pretty outrageous and I am wondering if we will one day see one of these 'mis-selling 'claims management industries spring up. I guess as it is govt backed that may not happen, alas. Anyway, my relatives are where they are and they need to settle this because of a significant change of circumstance.

I suspect what will happen in our case is that they will want to accept an offer on the house that is likely to be less than any RICS valuation, for various reasons. It's looking like they will have to get some sort of professional input as soon as possible, so at least they know with some kind of certainty, what their HTB liability is. It's definitely not as simple as the (no longer practising) Financial Advisor made them believe. I wonder who might be paying those FA bills!

Many thanks...

 

[Kosh]

Hi Kosh,
Alnwick eh, I know it (quite) well. In fact, I am wondering if you are chap I saw, and complimented on your Seagulls T-shirt, outside the former Co-op on Bondgate Within a few months ago. I totally agree about HTB, it was/is pretty outrageous and I am wondering if we will one day see one of these 'mis-selling 'claims management industries spring up. I guess as it is govt backed that may not happen, alas. Anyway, my relatives are where they are and they need to settle this because of a significant change of circumstance.

I suspect what will happen in our case is that they will want to accept an offer on the house that is likely to be less than any RICS valuation, for various reasons. It's looking like they will have to get some sort of professional input as soon as possible, so at least they know with some kind of certainty, what their HTB liability is. It's definitely not as simple as the (no longer practising) Financial Advisor made them believe. I wonder who might be paying those FA bills!

Many thanks...

It was indeed me along with my son, who I don't think had his Trossard kit on - which is unusual! It always makes my day when I meet a fellow Albion fan, but I'd rather presumed you were on your hols and not based up in the north (apologies lol)... It was a pleasure

I think when it comes to selling the situation differs... as you'd be employing a solicitor/conveyancer to handle the sale... and as part of the process any buyer would commit to a valuation survey, meaning your relatives wouldn't have to fork out for the fee in relation to this. If the sale is eventually agreed at a lower price (although any valuation survey usually wouldn't happen until the sale agreed bit), I suspect Target will have to swallow this and the process will work the other way round. So... if the sale price is equal to or less than the original purchase price, any redemption will either be as was: £44000 using my example, or less depending on the % shortfall. At least that's my understanding.

It's not a simple process, but in this instance, I'd simply look for a conveyancer who has experience of the HTB redemption system via selling, and although the fees will be slightly higher, they're not usually prohibitive. As long as the conveyancer is made aware of the HTB element from the outset, they should be able to manage all aspects accordingly.

Good luck with it all

 

[North East Seagull]

Thanks again Kosh. Next time I am in Alnwick (probably this Saturday) and I see any Albion short I will introduce myself. For some reason my knackered old laptop did not show all of your previous post, it has refreshed and it is showing it now. I'll take a proper look at your example and the link you included when I log off from work. Good advise re. explain to legal/financial people going to be involved in the sale that they will need to settle HTB loan via the sale.
Thanks again...

 

[Kosh]

Thanks again Kosh. Next time I am in Alnwick (probably this Saturday) and I see any Albion short I will introduce myself. For some reason my knackered old laptop did not show all of your previous post, it has refreshed and it is showing it now. I'll take a proper look at your example and the link you included when I log off from work. Good advise re. explain to legal/financial people going to be involved in the sale that they will need to settle HTB loan via the sale.
Thanks again...

Not to worry... my own laptop is soooo old it still runs FM 2009 without any issue lol... we're off up to sunny Berwick this weekend - alas, I doubt our paths will cross... However, if you happen to be up in future and you see me in the Town - feel free to say hello, it's always a pleasure to talk about the Seagulls as opposed to listening to that lot harping on about how good Dan Burn is.... really ? well I never!! Apparently, they're going to buy Trossard next, or so I was told the other day... It never ends lol.

 

[Shropshire Seagull]

Excel - 5 minute job !

 

[North East Seagull]

That's what I thought/hoped!

 

[Paulie Gualtieri]

Thanks Paulie.

The property is in England, outside London. Not sure who the administrator is. One of the problems is that they do not really want to pay for an approved survey just go get a settlement figure (in order to assess the suitability of the offer) and then have to do another one because unlikely to be able to settle within the 3 month survey validity period (assuming it is still 3 months). They need to sell before they can settle the HTB loan. This is why I was hoping to be able to get/create some kind of estimator based on what the survey valuation is likely to be (based on estate agent valuations etc).

Some basic questions I was trying to get answered are things like: Is the final settlement based solely on the difference between the property purchase price and the approved valuation (unless the price realised is greater than the valuation - unlikely in this case)? How does the amount borrowed under HTB affect things, is this where the interest accrued comes into play (I am reading 1.75% after the 5 year interest free period, seen nothing about the % increase after 10 years)? Is this interest compounded, if so monthly, annually etc?

All I bit complicated for me!!

Sorry for late reply.

Unfortunately there is no way around the settlement without having a HTB valuation on behalf of Homes England to determine the value in order to produce a redemption.

We used a Sussex based firm (FP Surveying) in Haywards Heath who specialise in HTB transactions, was roughly £200 from memory and is valid for 3 months but most RICS valuations can be extended up to 6 months.

It’s worth noting that the HTB Surveyor will typically favour with the owner (who instructed) as an example, when we remortgaged and purchased the full HTB share, the HTB surveyor valued at 400k whereas the OMV via our lenders valuation was £460k. As a result we only paid back a couple of thousand for the privilege of borrowing 20% and a decent LTV on the remo

As to interest I understand this to be paid monthly therefore the redemption will be original capital only + a % of the increase.