Young couple’s race against time to pay off £40k Help to Buy loan for three-bed town house
CUTTING back on your spending is essential when it comes to saving for your first home.
And with the average first-time buyer now having to fork out a whopping £51,000 for a deposit, it’s no wonder savers are moving back in with Mum and Dad to cut back on living costs.
We’ve heard from couples who've given up a lot to get the funds together like Nathan Doe and Tyla Stanworth who lived on a diet of beans and noodles for over a year to cut back on spending.
Or Hollie and Jamie Franklin who managed the save the £6k deposit in six months but it meant hardly seeing each other even though they lived together.
And with new sour stats revealing that in every region in the UK, monthly mortgage repayments are cheaper than renting, it must be a relief to finally get the keys to your house.
But if you took out a Help To Buy loan from the government then you won't be able to relax for long.
Once the initial five year interest-free period is up, you’ll start being charged interest and you’ll have to pay it back on top of your mortgage.
And it can't be paid off by drip feeding monthly payments, only in lump sums of either the total amount borrowed or 10 per cent of the property's current value.
Experts are warning that thousands of first-time buyers who used the Help To Buy loan face being trapped by lack of choice when it comes to taking out a new deal.
This week in the My First Home series we caught up with Aimee Campbell, 24, and Ryan Price, 23, who moved into their new build home in March this year.
But they're already having to think about paying more into their savings so that they’ll be able to pay off at least half of their £40,000 loan before 2023.
Here’s how they cope in the "constant saving game".
What's your house like and how much did you pay for it?
We live in a three-bed semi-detached town house in Telford in Shropshire.
Our house is a new build and it's a three storey townhouse, on a development called Silkin Green.
It's cute actually. There's an open plan kitchen and living room on the first floor, and on the second floors there's the spare box room, a bathroom and a spare double room.
Our master bedroom's on the top floor and another bathroom. We have a garden around the back and a little one around the front with a driveway.
We only moved in in March so it's still really exciting.
Now for the nitty gritty - how much did you pay for it?
The house cost us £222,995 and we pay £600 a month on our mortgage which we took out over 35 years.
We put down a five per cent deposit and got help from the Help to Buy loan which brought our mortgage down.
How does the Help to Buy loan work?
The government in 20 per cent of the value of your house so we got a £40,000 loan which brought our mortgage down to £182,995.
That means the 5 per cent deposit was just over £9,000.
Does paying the loan back on top of your mortgage worry you?
We don't have to start paying it back for five years after we took it out so we've still got a few more years to go yet.
You can only pay it off either in one go or in two lump sums, so that would be two £20,000 for us.
We're hoping to save up half of it by the time we need to start paying it off at the end of 2022, then we'll only need to pay interest on the £20,00 that's left over.
I know it's not ideal but it's better than paying interest on all it.
Are you a first-time buyer who want to share tips on how you did it? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest tips on buying your first home.
We're still trying to tuck money away, only about £50 a month at the moment, but we're getting the house sorted and furnished first.
It's a constant saving game, so I reckon we'll give ourselves until the end of the year to enjoy the house and the it's back to it so we can pay off the loan.
What is the Help To Buy equity loan?
THE government will lend you up to 20 per cent of the home's value as an equity loan, but only after you've put down a 5 per cent deposit.
If you're in London they will lend you up to 40 per cent of the property price.
The loan can only be used when you're buying anew build property and you'll still need to take out a mortgage to cover the rest of the property's value.
You can use the money to buy a home worth up to £600,000 in England or £300,000 in Wales.
The first five years of the loan is interest-free but you will have to pay a £12 management fee every year until then.
From year six of the loan, you'll be charges 1.75 per cent interest and it goes up every year after that.
You don't have to pay the funds back until you move house, but the government will take the same per centage of what you borrowed off the sale price.
If your property increases in value by the time you come to sell it then the amount they take will be more than you borrowed.
For example, say you bought your house for £300,000 and borrowed 20 per cent of the value from the government which is £60,000.
But when you come to sell it in 10 years, the property is now worth £360,000.
The government will take 20 per cent of that value which is £72,000 plus the interest on top.
You can repay part of the loan early but they will only accept payments of a minimum of 10 per cent of the property's value.
How did you manage to save it all?
We've been going out for six years and we've been saving for things like holidays and stuff before so we had a small amount already.
So we both opened up Help to Buy ISAs and and moved some of the savings over there.
We could only put in a maximum of £200 a month in those accounts so anything extra we put into a another savings account.
At the time, we both worked in sales and brought home around £1,000 a month and I was putting away £200 to £300 a month, Ryan probably a bit more.
We cut back on everything. We used to get a Domino's delivery once a week and that stopped so we saved at least £100 a month.
Ryan switch gyms from a corporate one that cost £45 to a cheaper one that cost £17.
We lived at my mum's because she lives on her own and has a spare room and she charged us to stay there but not much.
Over all it took us about 18 months to get the funds together.
Were there any problems?
I think the most annoying thing for us was that we were delayed twice.
We were initially supposed to move in in mid-February and then it was pushed back by another three weeks, and then again by a week.
We found out about a week in advance so we had time to rearrange the furniture deliveries but it was an absolute nightmare.
But Countryside did say they'd cover any of the delivery charges but luckily they didn't need to in the end.
Do you have any tips and tricks?
Yes! You should always ask for things.
We reserved the house back in October last year and at the time part of the deal with Countryside was that they would our stamp duty.
But then the government announced that they were abolishing it anyway so we asked them if they could cover our solicitor's fees instead.
We're grateful that they offered us that but they wouldn't have done if we haven't asked.
Remember, you're a cash buyer and you've got no chain so there's always room to negotiate incentives.
They paid for the carpets and dishwasher too because we asked.
How did you afford to furnish it?
When we knew that we were going to move we started to keep an eye out for deals on electrical and things like that.
Honestly, you couldn't move in the spare room at mum's because it was full of so much stuff!
We started to train ourselves to make the payments so we started putting away £600 a month to go towards furniture.
We asked for things like a kettle and a microwave for Christmas and we got loads of deals int he Boxing Day sales too.
A lot of our furniture is ex-display from Next too. We got 40 per cent off a dining room table, chairs, TV unit, coffee table and a side table all from the same range because it was on display.
MORE FOR FIRST-TIME BUYERS
There was one crayon mark on the table and it rubbed off so they're in perfectly good condition.
Do you mind living on a building site?
We were the first to move in and there are about 80 to 90 houses on the development.
It's going to be a building site for the next two years really but it doesn't bother us.
We're at work most of the day and they're not here on weekends.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a grim task but there are schemes out there to help first-time buyers own their own home.
Help to Buy ISA - It's a tax-free savings account where for every £200 you save, the government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan - The government will lend you up to 20 per cent of the home's value - or 40 per cent in London - after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime ISA - Another government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards your first home. You can save up to £4,000 a year and the government will add 25 per cent on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A government scheme that will see 200,000 new-build homes in England to be sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest .
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.