The decision to finally make that first step onto the property ladder is not the one and only big decision you have to make. There are other decisions to make, that go beyond choosing the perfect property, the location, the kitchen and carpet (if you're buying a new build.) You have to make a decision as to how you intend to finance your purchase and how much you can realistically afford to spend.
If you're not blessed with a money tree you may be considering other options in order to afford your dream home. Not everyone has the ability of being able to save up a hefty 10%+ deposit in a relatively short amount of time, and if getting the keys to your own home is something you hope to do this year you should definitely consider the option of Help To Buy.
Before I go into telling you the pros and cons of Help To Buy I should first of all mention that I am not a financial adviser and I do recommend that you do your own research through Government websites and that you speak with an adviser (and here's more reasons why you should speak to said adviser.) But I am an advocate for Help To Buy. Because we used it to buy our first home. And I would do it again.
Our financial adviser recommended we use the Help To Buy Equity Loan scheme because neither Tom or I are bringing in mega bucks each month, but our wages are fair. He advised we could afford to buy a house without the assistance of the Help to Buy Equity Loan, but our mortgage repayments would be higher each month and we'd be saving up for a deposit for at least a year and that would be by living incredibly frugally.
He did the maths with his mortgage gadgetry and the difference in the figures was staggering. We came out of the appointment knowing exactly what we were going to do. We were going to use the Help To Buy Equity Loan scheme.
The next thing we did was look at new builds and suddenly our options were wide open!
Without the Help to Buy scheme we would've been looking at houses around the £100,000 mark because even £10,000 would've taken us a good year, almost, to save up for. Using the Help to Buy scheme meant that we could've, if we wanted to, afford a house up to £170,000 but we chose to purchase around the £150,000 mark; making our mortgage repayments super low and super manageable, which gives us more spending money for decorating and social life!
It also meant that we only had to save up a little over £7,500 deposit and between us we managed that in just a few short months and we allowed ourselves a social life and we had money to spend on furniture as soon as we moved in!
The 20% loan from the Government isn't free money, and you shouldn't make that mistake of thinking that now you've got your keys and a manageable mortgage that there's nothing left to worry about on the horizon. Sorry friend, but you should really start saving right front the start. In 5 years time the Government are going to want their money back. And you will have two options.
Option 1: Pay back the loan in direct debits. The lovely folks at Help To Buy are great at giving you a forecast for how much your direct debits are expected to be in 5 years time. From memory, I think our repayments will be about £45 a month, and then gradually going up year on year until the loan is repaid. £45 a month is not a massive amount of money, and there is no reason why you can't start putting that to one side straight away.
Option 2: Sell up and repay the loan. Hence the phrase - equity loan - the idea here is that in 5 years time your property should gain enough equity for you to pay back the loan. I'm not going to lie to you, this prospect scares me a little. No one can guarantee that house prices will rise by that much, and even then the idea, for me, of paying back £31,000 is terrifying! That said, if property prices happen to slump or stay the same, you still only pay back 20% of the properties current value. The reason this worries me is if property prices do slump then that leaves no equity to put towards your onward move, which is generally larger and more expensive. I guess this highlights the importance of saving from the start.
With all of the above said, Help To Buy has opened doors for many, many buyers and I don't doubt that it'll have an impact on house prices in 5 years time. I'm no expert, but who knows? Everyone is going to need to sell up at some stage and a lot of people are going to be in the same boat - needing that extra 20% of equity - so this may have an impact on house prices.
Also - what's to say that you buy a property with a 10% deposit and struggle through with high mortgage repayments and in 5 years time there is another financial crash - you will stand to lose a hefty amount of equity anyway.
So you may as well enjoy 5 years of affordable mortgage repayments with enough left at the end of each month to pop away in a high interest savings account.
Well that's my two cents - what are your thoughts on Help to Buy? Have you used it? Are you planning to use it? Leave a comment below!