Reply to: Help to Buy / Help 2 Buy experiences/advice?

[TheCyclingProgrammer]

Next year the HTB is extended to 'old' homes which will be interesting.

It's not the same scheme though. The current scheme is an equity loan, the new scheme is just a guarantee scheme to help borrowers with smaller deposits get preferential rates - the government won't give you any money towards your house purchase on the extended scheme.

[TheCyclingProgrammer]

HTB overall is great - interest free loan from the govt of 20% of the mortgage so I earn interest on that 20% and then pay it off in 5 years.

Don't forget to account for the difference between any interest you earn on that 20% over 5 years and any increase in your property value over the 5 years because if the latter is more, it will wipe out any interest you've saved when you repay (although maybe that's just the pessimistic view).

[Freelancer Financials]

Maybe its changed from when I applied back in May but I don't have a montly commitment amount that I am paying (I just checked the paperwork!)

I think you may have misunderstood what Ben was saying.

You're NOT paying the 3% on the Help to Buy portion of the mortgage. The 3% is used only to calculate affordability. That's it. Remember, Help to Buy is their to help people with low deposits get a property, but they still have to proof that they can meet the mortgage payments.

As you pointed out, the Guarantee scheme (Help to Buy 2) that gets launched in January is even better with less restrictions. Doesn't have to be a New Build and also available to home movers as well as First time buyers!

[SneakySimon]

Monthly Commitment

Yep, around 0.50% higher than if you had 25% of your own funds to put down as the deposit but I guess that is why a lot of people will utilise the HTB scheme, because they dont have the full 25%.

Even though you dont make repayments on the HTB equity loan, Halifax will still deduct a monthly commitment of 3% per annum of the HTB loan proportion for affordability purposes so be careful around this point.

For example, if you are buying a property at £500,000 and contributing a 5% deposit yourself with the HTB loan totalling £100,000 (20%) then they will deduct (£100,000 * 3% = £3,000 / 12 months) £250 per month as a commmitment.

Maybe its changed from when I applied back in May but I don't have a montly commitment amount that I am paying (I just checked the paperwork!)

[SneakySimon]

Interest Rate

I got 3.34 on 2 year fix (plus an incentive of £150 cash and my stamp duty paid of £2,450) - there standard rate is 3.14 (just did a quick search) with no stamp duty paid so not too bad.

We were limited this year to buying a new house so obv lost some money that way as with HTB you have to pay the advertised amount and you can't be given 'incentives' on the house by the builder, though we negotiated grass (£400), dishwasher (£300) and carpets (£1500).

Next year the HTB is extended to 'old' homes which will be interesting.

[Power Mortgages Ltd]

Just out of curiosity what interest rates are these Halifax mortgages on? Aren't they going to be a tad higher than normal?

Yep, around 0.50% higher than if you had 25% of your own funds to put down as the deposit but I guess that is why a lot of people will utilise the HTB scheme, because they dont have the full 25%.

Even though you dont make repayments on the HTB equity loan, Halifax will still deduct a monthly commitment of 3% per annum of the HTB loan proportion for affordability purposes so be careful around this point.

For example, if you are buying a property at £500,000 and contributing a 5% deposit yourself with the HTB loan totalling £100,000 (20%) then they will deduct (£100,000 * 3% = £3,000 / 12 months) £250 per month as a commmitment.

[northernladuk]

Just out of curiosity what interest rates are these Halifax mortgages on? Aren't they going to be a tad higher than normal?

[SneakySimon]

Halifax

I have successfully applied for HTB and I am moving in December and have just exchanged. I went with Halifax as I applied back in May time when only them and another bank were doing HTB mortgages (a lot more are now doing Help to Buy).

Halifax around July changed from taking my last 3 years self assessments (income and div) to basing it on contractor rate which was helpful as my previous self assessments were only just enough to cover the mortgage but with contractor rate, I was fine. I have a car HP which they were fine with and just had a criteria that all my credit cards had to be both zero and closed. I got them to change that to be just zero as I use them regulalrly for travel so they always have a balance. TBH, that was a bit annoying but all I have to do is give my solicitor copies of statements showing the balance to be zero.

HTB overall is great - interest free loan from the govt of 20% of the mortgage so I earn interest on that 20% and then pay it off in 5 years.

Let me know if you need any other help?

[cojak]

FTFY

Self-certified mortgages are a lot tougher to obtain these days.

Just ask Northern Rock...

[Freelancer Financials]

Obviously as contractors you have the ability to prove your income with lenders like Halifax by annualising your contract rate which gets around the issues of:

c) contracting through an Umbrella firm who utilise a trust/loan payment therefore meaning your actual taxable income is minimal.

I have to disagree with you on this point Ben.

Contractors utilising these schemes can only use the minimum wage to apply for a mortgage, unless they can prove that they are also paying UK tax on the Loan Trust portion of their earnings.

Halifax will only annualise contract rate/earnings if UK tax is paid on the full earnings. e.g. contractors who operate through the following trading structures: LTD, Sole Traders & UK PAYE brollies.

In some very rare cases, Halifax may consider the trust/loan element of the contractor's payment BUT ONLY if they're paying UK tax on it. Which defeats the whole objective why anyone would be using a trust/loan payment scheme.

Halifax will NOT accept any earnings into their affordability calculations whether using accounts or contract rate if UK tax is not being paid on it.

The only way a contractor can get round this issue, is if a dodgy mortgage broker disguises them as working through PAYE brollies.

So you need to be careful what you post.

John Yerou

[Power Mortgages Ltd]

It was based on contract rate as I have been on this gig 3 months now and have a 6 month extension in place starting in Dev

HTB don't want to see anything so to speak but I gave them my end of year figures which they were happy with. New build developers wanted me to go through there own affordability assessment guys as a stage one, then had to go through HTB application.

A family member is a Mortgage Broker and is dealing with my case and he wondered about the same points you raised but his Halifax BDM mentioned he had many similar cases with other contractors and used the contract rate method.

Hope this helps.

Thanks for the response, handy to know. The only concerns I had previously was surrounding the HTB application process and the income maybe being deemed not sufficient to support the size mortgage the client needed if they insisted on using accounts to assess income because as I am sure you are aware, you are always able to borrow more on contract rate annualised (which Halifax would use) than based upon salary and dividends.

Therefore if salary and dividends were say, £40k but contract rate annualised was £100,000 and you needed to borrow £300,000 the mortgage aplication would be fine and Halifax would lend you the £300,000 but I didnt know if the HTB application would state your income of £40k probably couldnt afford to support a mortgage of £300,000.

Good to know that they dont really make those kind of checks though.

[Going Strong]

Hi Going Strong,

With the application you have submitted to Halifax for the mortgage, was that based upon your contract rate or salary and dividends from your Limited Company?

If if it based upon contract rate, did you use this same income for the HTB application or did they wish to see your taxable income (salary and divdends) from the accounts?

As a broker, we dont get involved in the application process for the HTB which is done directly so I am keen to understand how they work this as I would imagine if they insist on assessing your income via accounts, there will be a large difference between the income on the HTB application and the income on the mortgage application if that is based upon contract rate and didnt know if that is likely to cause any concerns?

It was based on contract rate as I have been on this gig 3 months now and have a 6 month extension in place starting in Dev

HTB don't want to see anything so to speak but I gave them my end of year figures which they were happy with. New build developers wanted me to go through there own affordability assessment guys as a stage one, then had to go through HTB application.

A family member is a Mortgage Broker and is dealing with my case and he wondered about the same points you raised but his Halifax BDM mentioned he had many similar cases with other contractors and used the contract rate method.

Hope this helps.

[Power Mortgages Ltd]

Hi Going Strong,

With the application you have submitted to Halifax for the mortgage, was that based upon your contract rate or salary and dividends from your Limited Company?

If if it based upon contract rate, did you use this same income for the HTB application or did they wish to see your taxable income (salary and divdends) from the accounts?

As a broker, we dont get involved in the application process for the HTB which is done directly so I am keen to understand how they work this as I would imagine if they insist on assessing your income via accounts, there will be a large difference between the income on the HTB application and the income on the mortgage application if that is based upon contract rate and didnt know if that is likely to cause any concerns?

[Going Strong]

HTB

I'm going through a HTB mortgage application at the minute.

My HTB application was successful in terms of affordability and I also have a decision in principle from Halifax with a full application going through today. Fingers crossed all goes through smoothly.

What is the application process like? HTB application was straight forward and was successfully in 4 days
Where you 100% honest about your earnings? I was totally honest
Were you advised of any specific criteria that must be met in terms of expendable income?
Any other advice?

The new Halifax lending criteria for contractors are fairly new but should make like easier.

Hey all,

Has anyone as a contractor been through this process before?

What is the application process like?
Where you 100% honest about your earnings?
What were your earnings (roughly)?
Were you advised of any specific criteria that must be met in terms of expendable income?
Any other advice?

Here's my situation:

Contractor for 2 years
£350pd
Mortgage agreement in principle to hand
£20,000 of loan/credit card debt
982 Credit Score
No missed payments for approx 24 months
Lone applicant
Buying 3 bed semi to live with wife for £289,950

Hoping to look at a house tomorrow and if all is well go through the Help 2 buy scheme.

Any advice is very welcome

Thanks
N

[ExPermie]

20k of loans/cc is going to sting isn't it?

It'll put a lovely dent in the affordability side of things!

According to the fountans of wisdom over at MSE, Help to Buy is aimed at the credit squeky clean/never missed a payment since the age of 18! OK, probably a bit OTT, but I read it ain't gonna be like the old boom days when anyone with a pulse could get a mortgage!