Reply to: Warchest never seems enough....

[TheCyclingProgrammer]

So, being too lazy to actually read about it, is it still accurate that any rise in house value affects your repayments?

For the equity loans (the scheme that started in April)...yes. Conversely it goes down if your house loses value.

Not sure on the ins and outs of how exactly its calculated though (e.g. how do partial repayments work?).

[Old Hack]

I don't think repayments were affected at all by the rise in prices.

[TheCyclingProgrammer]

This is the bit where I admit to being wrong. I'd blame the drugs, but I think I did just keep confusing the two.

Maybe we'll buy new build flats then We don't own any houses by the way, the kids do, we don't. So the idea is still correct, but I was confusing the two.

Apologies

Apology accepted.

Yes, why not try your idea with new build flats? You might still want to watch out if you plan to rent them out though. Check to see if its a blanket "no sub-letting" rule or just a "no BTL mortgage" rule.

Revisiting your original idea, as you proposed - it seems reasonable. Unfortunately there aren't any new build developments happening where we are looking to move (Billericay/Chelmsford), within our price range. Loads of new building happening further out near Colchester but we don't really want to move that far out.

Current plan is the much simpler plan of putting down a 20-25% deposit, securing a 30 year term mortgage on a 3-5 year fixed (repayments of around £700-800 p/m) and putting a significant amount of our surplus income into the house by making overpayments (having already established a good pool of general/emergency savings and a decent company warchest).

Current estimate is we could afford £5k in overpayments a year, knocking an extra £25k off the mortgage over the 5 year fixed term, with a net effect of knocking 15 years off the mortgage term and saving almost £60k in interest. Doesn't seem too shabby.

[Ticktock]

So, being too lazy to actually read about it, is it still accurate that any rise in house value affects your repayments?

Depending on how much it influences the repayments by, that's not a completely terrible idea to try to control price rises to an extent.

[Old Hack]

Guarantees is not the same as "gives you money". The government guarantees a portion of the mortgage in the event of a default. This is to encourage the lender to give a more favourable mortgage rate.

The guarantee is also only for a maximum of 20% of the house value. So if you have a 5% deposit, the guarantee will cover another 15%. It applies to any mortgages with a LTV between 80-95%.

It's outlined in the document you yourself linked to. You might want to read it again!

You still seem to be getting confused between this and the equity loan.

Read this:
Help to Buy: what's the catch? | Money | The Guardian

Then come back and tell me where it says that the government will give you a 20% loan towards your deposit.

Or alternatively, ignore me, continue believing you are correct and wait for your plans next year to come unstuck.

This is the bit where I admit to being wrong. I'd blame the drugs, but I think I did just keep confusing the two.

Maybe we'll buy new build flats then We don't own any houses by the way, the kids do, we don't. So the idea is still correct, but I was confusing the two.

Apologies

[TheCyclingProgrammer]

No, sorry, but it doesn't. If you put in 5%, the government guarantees a further 20%, with 5% of that being guaranteed by the bank. FAter 3 years, I think, you then have to pay 1.75% on the 20%, then somethign with inflation; you only pay a maximum of 75% of the value for 3 years.

Guarantees is not the same as "gives you money". The government guarantees a portion of the mortgage in the event of a default. This is to encourage the lender to give a more favourable mortgage rate.

The guarantee is also only for a maximum of 20% of the house value. So if you have a 5% deposit, the guarantee will cover another 15%. It applies to any mortgages with a LTV between 80-95%.

It's outlined in the document you yourself linked to. You might want to read it again!

You still seem to be getting confused between this and the equity loan.

Read this:
http://www.theguardian.com/money/201...p-to-buy-facts

Then come back and tell me where it says that the government will give you a 20% loan towards your deposit.

Or alternatively, ignore me, continue believing you are correct and wait for your plans next year to come unstuck.

[Old Hack]

Except its not.

The scheme that has been in place since April and only applies to new homes is an equity loan scheme where, as long as you have a 5% deposit, the government will provide up to a further 20% of equity meaning as far as the bank is concerned, you have a 25% deposit. You get a mortgage for the remaining 75%.

The guarantee scheme, which starts in January and applies to any home (but not BTL), requires at least a 5% deposit, but you don't get any money from the government. If all you have is 5%, you need to get a 95% LTV mortgage. The difference is, the government will guarantee up to 20% of the mortgage value meaning, in theory, you should get a mortgage deal that is equivalent to an 80% LTV mortgage.

The plan you outlined would only work with the former scheme, which only applies to new builds.

No, sorry, but it doesn't. If you put in 5%, the government guarantees a further 20%, with 5% of that being guaranteed by the bank. FAter 3 years, I think, you then have to pay 1.75% on the 20%, then somethign with inflation; you only pay a maximum of 75% of the value for 3 years.

[TheCyclingProgrammer]

Tis true, but it is the same thing.

Except its not.

The scheme that has been in place since April and only applies to new homes is an equity loan scheme where, as long as you have a 5% deposit, the government will provide up to a further 20% of equity meaning as far as the bank is concerned, you have a 25% deposit. You get a mortgage for the remaining 75%.

The guarantee scheme, which starts in January and applies to any home (but not BTL), requires at least a 5% deposit, but you don't get any money from the government. If all you have is 5%, you need to get a 95% LTV mortgage. The difference is, the government will guarantee up to 20% of the mortgage value meaning, in theory, you should get a mortgage deal that is equivalent to an 80% LTV mortgage.

The plan you outlined would only work with the former scheme, which only applies to new builds.

[Old Hack]

PC was castigated for daring to claim JSA (what is it, £75 per week now?) after paying NI and taxes, yet no-one seems to have an issue with OH abusing this scheme for potentially thousands?

In one way, I don't blame you - doing what you can to look after your family, following the rules as they are written. On the other hand, I'd argue that this is going against the spirit of those rules and harming the very people the scheme is intended to help.

Did you also sign up for each of the latest tax avoidance schemes as they came out? At that point they were legal (according to the letter of the law) and would have helped your family also.

The government are giving people 20% of their money for 3-5 years, with no interest. I'd be a fool not to get involved with it. Even if we left our house empty and lived in a house we bought using money, I'd be a fool not to. I give the Bank 30k, the government gives 120k. It will inflate the market, and create a bubble, so in 4 years, I either jump ship and cash in the inevitable 15% it will rise, and wait for the crash, or gamble on them not being able to let a crash happen.

Either way, I'd be a fool not to do it. Current rates I can get a mortgage tomorrow for 600k, or 450 and let the government give me the rest. As I said, it's a no brainer really.

I get a lovely sum out of my company by sharing the income and making the most of some clever expenses my accountant has agreed with HMRC, so I don't need to look at anything that looks remotely iffy; I work on the presumption that if something looks too good to be true, it inevitable is.

[wantacontract]

I am indeed just for discussional purposes. Thing is though. We can only take out a certain amount before paying a lot in tax. There is no point taking more out for your warchest because of the tax and I don't know how others do it but I can't live AND save hard for a warchest in what I pay myself a year. The rest I can't take out mounts up in the business so warchest builds it's self. I guess those who's lifestyle allows them to save then fair enough but again that to me are savings. Warchest is the spare money in the business I can't get out. Horses for courses that one I guess.



Don't understand this. I access my warchest in the business when there is no contract money coming in so I can continue to pay myself the same amount when I am out of work. That is the whole point of the warchest isn't it? Uninterrupted income during hard times. Am I missing something here cause your statement doesn't make sense to me.

I keep company pay and savings separate. Warchest is there to allow the company to continue to remunerate me while I am out of work. Personal savings are personal savings for me.

Interesting to see how everyone else does it though.

That is also exactly how I do it as well.

I feel it reins in my spending as I keep to the lifestyle of a average permie.

[northernladuk]

I think PC was principally castigated because he's a ******* moron who shares every detail of his dreary little life with us, hiding in the professional forums so he doesn't get called a ******* moron.

+1mil

[Old Greg]

PC was castigated for daring to claim JSA (what is it, £75 per week now?) after paying NI and taxes, yet no-one seems to have an issue with OH abusing this scheme for potentially thousands?

In one way, I don't blame you - doing what you can to look after your family, following the rules as they are written. On the other hand, I'd argue that this is going against the spirit of those rules and harming the very people the scheme is intended to help.

Did you also sign up for each of the latest tax avoidance schemes as they came out? At that point they were legal (according to the letter of the law) and would have helped your family also.

I think PC was principally castigated because he's a ******* moron who shares every detail of his dreary little life with us, hiding in the professional forums so he doesn't get called a ******* moron.

[Ticktock]

Tis true, but it is the same thing. Speak to your bank, they know all about it.

You can use it to move house, or buy a house. Our house is Mortgage free, and in the girls names. These will be 'our' homes, per se.

Trust me, we've looked into it.

PC was castigated for daring to claim JSA (what is it, £75 per week now?) after paying NI and taxes, yet no-one seems to have an issue with OH abusing this scheme for potentially thousands?

In one way, I don't blame you - doing what you can to look after your family, following the rules as they are written. On the other hand, I'd argue that this is going against the spirit of those rules and harming the very people the scheme is intended to help.

Did you also sign up for each of the latest tax avoidance schemes as they came out? At that point they were legal (according to the letter of the law) and would have helped your family also.

[northernladuk]

I don't see the point of letting a warchest grow and grow unnecessarily, take the money out and use it - invest, spend, save, burn, whatever.

Yeah I can see that. Might as well save it in the most tax efficient way as possible though I would have thought. Need to look in to options what to do now it is approaching a happy state as you say though.

[Project Monkey]

I am indeed just for discussional purposes. Thing is though. We can only take out a certain amount before paying a lot in tax. There is no point taking more out for your warchest because of the tax and I don't know how others do it but I can't live AND save hard for a warchest in what I pay myself a year. The rest I can't take out mounts up in the business so warchest builds it's self. I guess those who's lifestyle allows them to save then fair enough but again that to me are savings. Warchest is the spare money in the business I can't get out. Horses for courses that one I guess.



Don't understand this. I access my warchest in the business when there is no contract money coming in so I can continue to pay myself the same amount when I am out of work. That is the whole point of the warchest isn't it? Uninterrupted income during hard times. Am I missing something here cause your statement doesn't make sense to me.

I keep company pay and savings separate. Warchest is there to allow the company to continue to remunerate me while I am out of work. Personal savings are personal savings for me.

Interesting to see how everyone else does it though.

I keep a sufficient warchest (as you've defined it) in the business, and take the rest out as divi's. If this take me over the upper tax threshold, then I pay the addition tax. I decide how big the warchest needs to be and done let it drop below that number. CT, PAYE/NI, VAT and any other liabilities stay in the business also (of course).

I don't see the point of letting a warchest grow and grow unnecessarily, take the money out and use it - invest, spend, save, burn, whatever.