Help to Buy scheme extended?? HOW the HTB Equity loan TRAPS first time buyers!

[@TY-vc8mk]

I couldn’t agree more with your points - in the grand scheme, HTB is totally for helping developers recognise premium sales and recurring income across the entire life cycle of new build(ground rent and service charge)

[@TheNimbleNomad]

Absolutely! Fantastic point!

[@tomisin3754]

As far as I know you could use the help to buy scheme even if you could afford to purchase a house without using the scheme meaning you can punt down more than 5%, get the gov 20% loan and put the rest on a mortgage.

[@TheNimbleNomad]

Hello - thanks for your comment. I think you are referring to the eligibility criteria based on what you have said? Yes, you are right and In practice you can but only in England. However the government website does state the affordability as one of the criteria for eligibility so I had to state it in my video: “The home you buy must be one that you can show you cannot afford (if you’re applying in Wales). Thank you for pointing this out and clarifying. I’ve included the link in the description to the gov.uk website for your reference as well.

[@tomisin3754]

@@TheNimbleNomad ah thank you. That makes sense.

[@georgiangelov2764]

Hi how to reduce the value of my property? I have help to Buy and I want to reduce the value of my property. I'm thinking to install solar panels and battery on credit do you think this will help thank you

[@ashrafelgendy5827]

Can I ask what happens if I decide to go ahead with garage conversion while still under the help to bye.. Will they fine me if I do it without thier permession??will they raise any legal proceedings against me or possess the house? I think they will charge me 20% of the cuurent value of the property when we pay off the loan which i am happy to pay as long as there is no legal proceedings. Any thoughts or advice.

[@TheNimbleNomad]

Sorry I don’t know about this- it’s worth checking with the solicitor about this.

[@charlotteharris3476]

I hold off with the garage conversion until you've paid off the loan htb will charge u more to pay back as a conversion will increase the value of the house x

[@savvasavraamides9786]

Hi there, Thanks for sharing your thoughts on this. What would be your personal opinion on the best and most affordable way to pay the HTB equity loan back if my plan is to sell the property in 5 years.

[@TheNimbleNomad]

Hi - this depends on your personal circumstances. But our plan at the time of trying to purchase the property was to save and staircase payment of the HTB equity loan I.e. two payments of 10% to pay 20%. I can’t provide more information as I don’t know whether you are doing London HTB equity (40%), what your personal savings, etc. are - so it depends completely on your circumstances.

[@savvasavraamides9786]

@@TheNimbleNomad Thank you for your help!!

[@TheNimbleNomad]

The other option you could do would be to consider remortgaging after 5 years. A lot of people increase the equity by paying over 5 years and therefore can remortgage to pay off the government equity. Although I definitely do not like this as you will end up paying more interest to the bank..

[@LittlePinayExplorer]

Thanks for this video. What do you think is the best scheme for first time buyers who will probably decide to leave or sell it after several years?

[@TheNimbleNomad]

Don’t buy a home. Instead invest that money in the stock market.

[@TheNimbleNomad]

You can live in a rented property. Buying a home is not the only way to live.

[@alexandra9944]

@@TheNimbleNomad Hard disagree. Rent money is just wasted money.

[@TheNimbleNomad]

What about interest, SDLT, conveyance fees and estate agent fees (when you sell) Not to forget about capital gains tax when your equity in housing grows..

[@sfsfsfsfds2342]

9:52 you are wrong, in year nr 7 the interest rate is 1.82 % around, not 2.75% , year 8 atound 1.89%, year 9 - 1.97%... Dont mislead people please.

[@TheNimbleNomad]

Not sure what you are on about - on screen I show what the break downs are which are pulled straight from the government website and it says it is a 1.75%. Ultimately anyone that is considering buying through HTB should do their own research. If you are referring to the subtitle then that is a simple error on my part, I am only human. The intention is not to mislead anyone here. For clarity the latest guidance is: From year 6: pay the £1 monthly management fee pay monthly interest fee of 1.75% of the equity loan interest rate will rise each year in April by the Consumer Price Index (CPI), plus 2% continue to pay interest until you repay your loan in full

[@sfsfsfsfds2342]

​@@TheNimbleNomad Ahh okay then, thank you for clarification, i thought that you meant that from year 7 interest will be sky high 2.75 + rpi. When in real life in year 7 it will be just around 1.82% so its going up very slowly. In year 10 according to average calculations it will be just 2.05% interest rate. Have a good day!

[@funmiscloset]

Just a note at 5:29 the minimum amount the govt will loan is 5% not 20%. 20% is the maximum

[@TheNimbleNomad]

Hi - No this is not true. You can ask for a 5% but the mortgage lenders did not have this sort of LTV set up for HTB properties. Minimum LTV set up was 75% and this may change in March as the new HTB scheme comes in. This is atleast true when we were buying in 2019

[@funmiscloset]

@@TheNimbleNomad my note is only in relation to the govt loan, but what your referring to could be under the old scheme as the govt website details the 20% maximum (40% in London)

[@TheNimbleNomad]

Ah ok - maybe things have changed we’ve not kept in touch with it as we decided not to buy through HTB

[@junaidthedangerousmeergame2925]

I’ve got one question say for instance you pay the equity loan fully back does that mean that 20% is yours then?

[@TheNimbleNomad]

Yes - ultimately the loan is a loan. With the catch that you have to also pay the equal appreciation of the property as well. I recently found that there are companies which are now mimicking the help to buy scheme but they don’t have crazy interest rates. You may want to check those out, I am considering making a video about this. Also these companies don’t offer you the loan only for new build properties.

[@junaidthedangerousmeergame2925]

@@TheNimbleNomad so basically our situation is we never knew about the equity loan has to be paid in full if you want to rent or buy another property

[@junaidthedangerousmeergame2925]

What I was abit confused about was, say we pay the equity loan and save up for another house and in a year or so if we sell the house would the 20% we paid be ours?

[@TheNimbleNomad]

Yes. You are buying the governments stake in your home. That’s kind of the point. Also if you factor in appreciation of the home then government always wins.

[@ijaen]

Thank you for the video. We are about to enter this process. Is this so negative? We have no means to enter the market right now and I dislike paying rent in central London. Almost the same amount will get us in a property and we have forecasted that we can save enough to pay the HTB in 4 years. Is this acceptable?

[@TheNimbleNomad]

I don’t know your personal situation and how you’re set up. My personal view would be stay away from HTB. I did a video on but vs. Rent A while back you can check it out I think it’s under the playlist on property

[@moharoon1286]

Thanks for sharing your thoughts on this. I've heard banks offer 'further advance' products which let you take out equity since owning the house (incase it's gone up in value after the 5 years) and are designed to help you contribute to the equity loan. What are your thoughts on this?

[@TheNimbleNomad]

Hi - yes I have heard of these and it’s one of the popular ways people choose to pay back the equity loan from the government. Keep in mind it’s not necessarily because the price of the house has gone up but it’s because you have contributed into the mortgage with the bank and therefore your overall equity in the house has gone up. Basically by doing this - 1. You will pay back the gov debt but you take on a new kind of debt, one which incur additional interest through the bank as effectively your LTV is increasing and therefore so will your monthly mortgage payments 2. The road to paying back your home becomes longer and you end up spending more years and your income trying to pay off the home. Based on the above, I’m again not a big fan of this approach as I personally want to try and achieve financial independence from mortgage payments sooner rather than later. Thanks for your comment - it was really thought provoking! Hope my comments help - although you may have a different view on this.

[@kessy7671]

Can one get a new build without the help to buy scheme?

[@TheNimbleNomad]

That is what HTB is for

[@kessy7671]

The Nimble Nomad okay Thankyou

[@MaSheri33]

You can buy a new build through a normal mortgage process, but if you can afford a new buid without help to buy, there is generally little incentive to do get a new build. New builds are priced at a premium, meaning it is likely to take several years before you can sell at the price you bought it for. You can likely find a building with a similar profile cheaper.

[@600goa]

Nice video I watched in 1.75x speed though

[@latifaodumosu6922]

same

[@TheNimbleNomad]

Thank you both for your comments. I appreciate the feedback

[@gibraltor999]

Nice . Thanks Arjun. Crisp and clear. Changed my opinion after your video :)

[@TheNimbleNomad]

Thanks for watching

[@saeedahmadi8039]

As a first time buyer in london i have to say I am totally disagreed with you , help to buy is much better than you pay other people mortgage, i use to pay £1200 pm for rent now. I pay £800 pm for my mortgage

[@TheNimbleNomad]

Thanks for your comment - I think people have differing views on this. For me the stress of having to save to buy the government equity was too much. I think it’s great that you are paying lesser for your mortgage! All the best!

[@dreamEternal]

'...And you never want to mess with the government' - The Nimble Nomad 2020. Great video man, i've seen a bunch but this does the best job of explaining. Couple of things I can't seem to find an answer to though are; 1. After the first 5 years and the interest rates kick in, using currently available figures what would be the actual monthly payments on a 200K mortgage with 20% govt. equity in years 6, 7, 8, 9 and 10. Struggling to get my head around how the payments will increase in figures (not just %) 2. If I decided to sell said 200K house in 10 years and it's gone up by 10K, I would still get 80% of the proceeds right? similarly if it went down by 10K would I have to pay back the govt more to make up the initial 20% value. 3. Lastly I didn't quite understand why it's better to stay in the house for the length of the mortgage, selling the house after 5 years or 25 years would still mean you pay back 20% of the sale to the govt. right? Really appreciate your thoughts and thanks in advance

[@TheNimbleNomad]

Wow! This is one of the best and most detailed comments I have had! Thank you for watching the video right through! I’ll try and answer your points as best as I can: 1. I am planning to do a follow up detailed video on the costs, I just haven’t had the time to work this out on excel. It will be coming up in the next few weeks. 2. If the price of the home goes up; then yes you need to pay the equivalent growth to the government as well. Basically they make a profit either way! Although you must keep in mind that you also need to factor in the additional costs for valuation, survey and admin fees which eat into your slice of the growth in the house equity. 3. The reason I recommend staying in the home is because you are not constrained by the pressure of having to pay the equity back in order to sell the home. You could always staircase on the property ladder but it’s going to be very stressful based on your own personal circumstances. I know my wife and I were very stressed when we thought about the 5 years when we were planning to buy.

[@divyaprem8116]

As Passer By mentioned, in case the property value goes up at the end of 5 years and you intend to pay the govt back - yes, u have to pay 20% of that increased value. But if the property value has gone down, u still pay only 20% of that lower valuation. It's an informed decision isnt it? Also, I'm not sure about what additional interest rates kick in, if you pay back by 5 years? Yes there is a fee to valuation and administrative expenses- but I was under the presumption this came to about ~£2000. This in comparison to the 95000 you borrow from the govt for a 500000 house, seems fair. I'm not belittling the 2000 pounds, I'm just considering the amount of money immigrants pay in visa charges and health surcharges, and just not surprised.

[@TheNimbleNomad]

Yes you are right that if the valuation goes down then you pay less BUT if you look at historic valuations over the past 10 years the likelihood of that happening is very low - it’s not impossible but the chances of a reduction in price is low. Also to your point of paying back £95k within 5 years, whilst this is possible for a lot of people it is going to be a stretch to pay this amount back on the basis of savings within 5 years. So the only other option would be to remortgage the property against the equity you have paid to the bank and increase the LTV. Which means you pay more interest over a period of time. I’m not sure how you’ve come up with 95k but you need to keep in mind that this is not a set value so you will need to keep extra cash on hand if you are paying back in one lump sum. If you do not pay the loan back in 5 years then the government charges an interest fees which progressively increases each year - this information is readily available on the HTB website.

[@OjojoHK]

Thanks so much for this take! So grateful for your advice! The more i read about the scheme, the more suspicious I got. Please correct me if I am wrong: .the developers will allocate specific apartments within a new development-complex/new building to become "affordable housing and eligible for Help2Buy-buyers", right? Usually meaning an apartment that faces the uglier vistas, strange layouts, cheaper materials, uses side entrances, making you feel like a second-class resident in your community, using your hard-earned cash?

[@TheNimbleNomad]

Hi - I think you are referring to affordable housing, yes all new developers are required to allocate a certain percentage of property to affordable housing. However the help to buy scheme is not about buying these, it’s about getting an equity loan and/or using the help to buy ISA. Overall new builds are built with not so great materials and also if you read about the cladding issues that exist in new builds it makes these properties less desirable. Hope this helps and thanks for watching 🙏🏽

[@OjojoHK]

@@TheNimbleNomad Thank you for clarifying Arjun. You're prompt. Still, one would be losing a little too much control to the government's stake in one's property, and the property would most likely be leasehold (house or flat). Off-topic: wished the UK would abolish leasehold system, just discourages young buyers from living-small, and encourages endless urban sprawl of houses in suburbia.

[@TheNimbleNomad]

Agree! You are right! This is one of the main reasons we were so hesitant with buying. Ultimately it’s for the best as it would have been impossible to get out of that apartment given what the world is facing right now. If you are looking at property I recommend reading this book called “Quit like a millionaire”. It will give you more perspective on property and how money works. I’m planning to do a review On the book on my channel. I really think everyone should read that book it’s a major game changer.

[@RR-nw1gr]

What if we want to pay the 20% of government share after 5 years??

[@TheNimbleNomad]

If you want to pay the government equity after the 5 years have passed you will need to pay the additional interest as stated for the government equity on top of the mortgage. This will increase the amount you need to pay back significantly.

[@RR-nw1gr]

The Nimble Nomad thanks for you kind reply. Mortgage is different party from govt share. How could we pay the interest on govt share if they are entitled to ask after 5 year’s , If so then can you please give us an example how it will be??

[@TheNimbleNomad]

The government equity value that you need to pay back for each year you delay paying back the amount will increase in line with the interest rates. Therefore when you need to pay the amount back either as a whole or staircasing then you will need to factor this additional interest and pay the amount back

[@RR-nw1gr]

The Nimble Nomad it would be great if you have an example like you showed in the video for 200k house

[@jonnyfreeman9361]

You can reportage the house to pay back the government, if you have been overpaying slightly on the mortgage then the wont actually increase much at all

[@SelfInvested]

Very informative! I didn’t realise you had to get separate survey done when selling. It might be worth mentioning the Help to Buy ISA is closed to new applicants, but you can use a Lifetime ISA which has similar benefits!

[@TheNimbleNomad]

Thank you! I’m going to do a series on ISAs. Thanks for your support!

[@neiljagger3590]

It's a shame that the Government want a share of the increase in value. It would be nice to be able to benefit from the full rise in price as it will make moving to a bigger property that bit harder. Good comprehensive explanation though as i didn't know you can get a higher amount for London property.

[@TheNimbleNomad]

Yes Neil! It is quite unfortunate because the involvement of the government only makes things more complex and trust me no one really wants to mess with the government! Thanks for watching and your comment!

[@TY-vc8mk]

Also from the UK government perspective I guess this would be a quite good yield investments based on the average growth of housing market in the UK🤔

[@TheNimbleNomad]

Agree!

[@staylor7054]

Thanks for the video, you don’t have to borrow a minimum of 20% it can be 5%/10%/15% etc

[@TheNimbleNomad]

Hi - That is not correct. You cannot borrow less than 20% for the government equity loan. I have already been through the process. Unless the rules have changed in 2021 I can only speak from my experience which was in 2019, but The banks will not offer you a mortgage where you are borrowing only 5% government equity loan.

[@annnekk]

I think you need to go and watch Self Invested’s video in which he compares mortgage with and without HTB! Educate yourself to educate others instead of giving out false information. The first five years without interest are giving you the head start to make savings to pay back the loan, and with the lower LTV, you get better mortgage rates which you’re ultimately saving money, you can even remortgage the house after 5 years (when your fixed rate is up) and include the HTB loan value in it which simplifies the process! And show me any lender (private or commercial) who has a share of equity and would say no to having a share of the profit?? Honestly… this is a LOAN, not a gift.

[@TheNimbleNomad]

You are welcome to have your own opinions. But there is nothing false in my video. I have stated the facts and substantiated the point; ultimately remortgaging means you will be in debt for longer and incur a higher interest rate. If your idea of home ownership is to be locked in mortgage for 35 or more years then by all means go for it. Most people don’t want to consider the interest they will pay when they remortgage. Not to mention the additional costs and fees you incur each time you get the house surveyed independently. Ps - I am well aware that this is a loan, which is why I talk about the interest rates and repayment in the video, which you’ve clearly not watched about. No one is expecting handouts.

[@behzadutube]

You [perhabs intentionally] misunderstood the purpose and function of HTB and your points are frankly pointless....but you still get the views which is your only goal