Help to Buy interest payments and rate rises explained | First-time buyer guide

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In this Help to Buy Equity Loan video, you will learn how interest payments and interest rate rises are calculated, and how you can reduce the amount of interest you pay on your loan. We cover both the old scheme, which ended in 2021, and the new model, which started in 2021.
The Help to Buy Equity Loan scheme is a Government initiative which offers first-time buyers equity loans of up to 40% of a property’s value in London (and 20% in the rest of England) to buy new build homes
For the first 5 years after you buy your home, there is no interest to pay on the loan. From year 6, you start to pay interest on the loan, but those payments don’t go towards paying off the loan.
UPDATES & CORRECTIONS
Homes England initial stated that the measurement that would be used for inflation on the new scheme was to be CPIH*, but they have since changed it to CPI**. I'll provide more information on the implications of this in a future video, but essentially CPI is CPIH without owner occupiers’ housing costs and Council Tax.
(*www.gov.uk/government/news/new-help-to-buy-scheme-open-for-business
**www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide/homebuyers-guide-to-help-to-buy-equity-loan-2021-to-2023-accessible-version#understanding-your-interest-payments)
CONTACT DETAILS
Email: lemuelstudios@gmail.com
Instagram: @SelfInvested_UK
Twitter: @InvestedSelf
LINKS MENTIONED/USED
Help to Buy Equity Loan playlist- ru-vid.com/group/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_
Help to Buy Equity Loan Buyers' Guide - www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide/homebuyers-guide-to-help-to-buy-equity-loan-2021-to-2023-accessible-version#understanding-your-interest-payments
Interest rate Calendar Lottery - www.moneysavingexpert.com/news/2019/05/help-to-buy-equity-loan--save-p100s-or-p1-000s-in-interest-by-ch/
Inflation rates - www.ons.gov.uk/economy/inflationandpriceindices
Mortgage rates - www.statista.com/statistics/386301/uk-average-mortgage-interest-rates/
OTHER PLAYLISTS
My Shared Ownership Experience (series) - ru-vid.com/group/PLUG_SDz9gLQKqInQrRbCC21S4pZpp4JrN
Shared Ownership - ru-vid.com/group/PLUG_SDz9gLQI3lKk_GIxi9Kgn_GeCaDDp
Help to Buy Equity Loan - ru-vid.com/group/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_
CHAPTERS
00:00 Intro
00:34 Summary of the Help to Buy scheme
01:35 How interest payments are calculated
02:19 Interest rate & inflation: new vs old scheme
03:01 RPI vs CPIH: what's the difference?
05:38 How the interest rate rise is calculated
08:23 Does the Help to Buy interest rate rise quickly?
09:32 Impact of completion date on interest rate
13:43 Takeaways
16:16 Outro
ABOUT ME
I'm Lemuel. I'm not a financial advisor. I'm not an expert. I'm just a regular guy that enjoys talking about how we can do better with money.
If you want to learn more about how you can do better with money, then subscribe to the channel and hit the notification bell so you get an alert whenever I upload a video.
DISCLAIMER
This video is not meant to address the specific circumstances of any particular individual. It is created for educational purposes only. You should not rely upon it as legal, financial or professional advice, or a substitute for it. I do not accept any liability whatsoever for errors, omissions or misstatements contained therein. You should consult a suitably qualified professional if you require specific advice or information.

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Опубликовано:

3 апр 2022

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Комментарии : 31

@SelfInvested 2 года назад

UPDATES & CORRECTIONS Homes England initial stated that the measurement that would be used for inflation on the new scheme would be CPIH*, but they have since changed it to CPI**. I'll provide more information on the implications of this in a future video, but essentially CPI is CPIH without owner occupiers’ housing costs and Council Tax. (*www.gov.uk/government/news/new-help-to-buy-scheme-open-for-business **www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide/homebuyers-guide-to-help-to-buy-equity-loan-2021-to-2023-accessible-version#understanding-your-interest-payments)

@TheMalcolms7 2 года назад

He's back 👍🏾 Good to see you doing great content as always Hope you and family are well bro

@SelfInvested 2 года назад

Thank you, bro! Hope you and the family are well!

@TheMalcolms7 2 года назад

@@SelfInvested we are thank you. It's been a tricky few months but there is light at the end of the tunnel 🙏🏾

@SelfInvested 2 года назад

@@TheMalcolms7 I did she a video about your wife’s slipped disc. Glad to hear she’s on the mend!

@193littlemiss 2 года назад

Hi Lemuel, thank you so much!!!!! This has been extremely helpful. Learnt alot of new things.

@SelfInvested 2 года назад

Glad to hear it! I thought this info would be new to most prospective help to buy borrowers. Thank you for leaving a comment :)

@themarksmith 2 года назад

Useful info - thank you!

@SelfInvested 2 года назад

You’re welcome! Thank you for watching :)

@randomcomputer7248 2 года назад

Light a candle for the poor souls hitting year 6 of their equity loan this year

@SelfInvested 2 года назад

🙏🏿 It’s going to get rough for all of us! Just to clarify, if people’s 6th year starts this year, then their interest rate will start at 1.75%. The people that will be hit by high rate rises this year are those whose 6th year (5 years and 1 day) started before January 1st this year…

@user-gr3yt7ji7j Год назад

Hi, Thanks for the video. I was under the belief that there was a maximum of a 7% or 8% per year increase so even if RPI was above 10% it would be capped. Please let me know?

@Nicheadvice 2 года назад

Welcome back been a while

@SelfInvested 2 года назад

Thanks, Payam. I’ve been busy having babies! Hope you’re well ;)

@Nicheadvice 2 года назад

@@SelfInvested Congratulations

@cookiejar01 2 года назад

Thanks for the video. Hope the little one is okay!

@SelfInvested 2 года назад

You’re welcome and she is. Thank you for watching the video :)

@Donkey1994 2 года назад

Great Video as always. Have you actually came across anybody who paid off the loan? Is it possible to sell property after couple of years even if loan is not paid off or it has to be paid off in order to do so ? Many thanks

@SelfInvested 2 года назад

Thanks, Telly! Yes, I actually know someone who has paid it off and I’m hoping to interview them. When you sell the property, you have to pay back the loan. You can pay it back with the proceeds of the sale.

@generalk9947 2 года назад

Hi good vid but I have a question I’m 23 at the moment and I live with 3 other siblings and my mum. To cut the story short if we didn’t go through such tough situations I would of probably got my own place through the council sometime ago but I needed to help my mum which led to me having to leave uni etc. so now we live in a 4 bedroom home what are the chances that I can get my own council flat ? If not what other alternatives do I have in terms of cheaper renting flats ?

@SelfInvested 2 года назад

Hi there! Thanks for watching the video. TBH I need to do more research on renting, it’s not an area I’m very familiar with. Having said that, I know getting a council home is usually pretty difficult unless you’re considered high priority…

@Michael.P247 Год назад

Hi Self Invested, do you think the government could launch a new HTB for existing home owners? What do you think are the chances, especially when/if there’s a slow down in the economy and high inflation/recession ?

@SelfInvested Год назад

Hi Michael 👋🏿 I don’t think so and I think any new that is introduced will probably be focussed on first time buyers

@jaysongillham 2 года назад

Is the market value of the equity loan recalculated at regular intervals while you are paying interest? Or is it only revalued if you intend to repay some or all of the HTB loan? You kept the value of the equity loan at 60k throughout your example.

@SelfInvested 2 года назад

So, from the guidance, it states that the interest rate is based on the market value at the time the property was purchased. There’s no mention of the loan being revalued at regular intervals, so I don’t think it is. I did, however, ask Homes England and my local Help to Buy agent if it is revalued after a repayment, but I haven’t received an answer. I’ll update this response if I do get answer…

@SelfInvested 2 года назад

Hey Jayson! So, I've finally received an answer, after contacting Help to Buy on twitter. The interest calculation after a repayment is based on the initial purchase price and not the most recent valuation. This means the property value used to calculate interest payments does not change over the full term of the loan, regardless of any subsequent valuations.

@jaysongillham 2 года назад

@@SelfInvested wow that's really good to know. Thank you for looking this up for me (and others!). I was certain there would be another catch there. HTB is clearly much better than shared ownership then. Except of course that your service charge can go up by any arbitrary amount which is worrying.

@SelfInvested 2 года назад

Have you seen my video where I compare the two? ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-kkfCOIj60IM.html

@edizibrahim9097 Год назад

@@SelfInvested but should you look to pay the full equity off, the property will need to be revalued to determine what the current market value is, right?