There is also the issue that homes bought new using the scheme are competing with new builds, making it harder for their owners to sell, possibly forcing them to drop their asking prices.
Your home is not 100 per cent yours but you are responsible for it
With a standard mortgage, the lender’s charge only covers the amount owed, with the borrower retaining any additional equity at the point of sale.
With Help to Buy, advisers need to make it clear to clients that the government has a charge for the initial 20 per cent borrowed but will also benefit from any rise in the property’s value, even if this is due to improvements the client has made and paid for.
Advisers also need to make clients aware they will need permission to make any substantial improvements to the property and will pay 100 per cent of the cost of those improvements, but only receive 80 per cent of the profits.
You cannot rent the property out
One of the stipulations of a Help to Buy loan is that you cannot sublet it, something, Dave Miller warns, many people are unaware of.
“If a couple who both own their own homes decide to move into together, it would be quite sensible to move into one property and keep the other one as an investment and rent it out.
“But, if that property was bought through Help to Buy, subletting it puts the owner in breach of their loan agreements. The only way a Help to Buy can be rented out is by repaying the Help-to-Buy part of the loan.”
So is it worth it?
The expectation was that the borrowers’ wages would go up, or the value of their home would increase, or both, leaving them in a position after five years to either pay off the government part of the loan in full or start paying back the loan on top of the rest of their mortgage payments. But for many it may not have worked out like that.
Many houses bought on Help to Buy schemes have not increased in value as much as the owners may have hoped, while some have actually dropped in value, often because the original prices were inflated.
We have also seen wages stagnate, inflation rise and interest rates may rise soon, which means not only will those on Help to Buy see their government loan due for repayment, but could see their monthly mortgage repayments rise too, a double whammy.
