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  • FIRST POST
    • Phil Caddy
    • By Phil Caddy 17th Apr 17, 12:35 PM
    • 7Posts
    • 1Thanks
    Phil Caddy
    equity loan help to buy pay off
    • #1
    • 17th Apr 17, 12:35 PM
    equity loan help to buy pay off 17th Apr 17 at 12:35 PM
    right... i need some advise please on a plan i have to see if it's a good idea or not, me and my partner want to buy a house with a help to buy equity loan scheme, house price roughly £200K so our deposit will be £10K and the government will provide us with £40K, so the plan is to save £200 a month for 5 years (the interest free period) to have £12K then remortgage the house for the extra funds needed to go with our £12K to pay the government off, this way we avoid paying interest each month to them and get it paid off sooner to save giving them a lot more money in the long run, would this be a good solution or not? i'd like opinions before committing, thank you!
Page 1
    • zx81
    • By zx81 17th Apr 17, 12:38 PM
    • 12,542 Posts
    • 12,710 Thanks
    zx81
    • #2
    • 17th Apr 17, 12:38 PM
    • #2
    • 17th Apr 17, 12:38 PM
    I ran out of breath about 400 words into the first sentence...
    • Phil Caddy
    • By Phil Caddy 17th Apr 17, 12:44 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    • #3
    • 17th Apr 17, 12:44 PM
    also...
    • #3
    • 17th Apr 17, 12:44 PM
    i'd like to add me and my partner need to move out this year so further saving wouldn't be an option otherwise i'd like to save more of the deposit ourselves and avoid using help to buy but the position were in, the help to buy seems a good idea??
    • Phil Caddy
    • By Phil Caddy 17th Apr 17, 1:01 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    • #4
    • 17th Apr 17, 1:01 PM
    take a breath
    • #4
    • 17th Apr 17, 1:01 PM
    I ran out of breath about 400 words into the first sentence...
    Originally posted by zx81
    no one is stopping you from taking a breath, there is comma's

    but this doesn't help with my question
    • BrassicWoman
    • By BrassicWoman 17th Apr 17, 4:26 PM
    • 1,224 Posts
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    BrassicWoman
    • #5
    • 17th Apr 17, 4:26 PM
    • #5
    • 17th Apr 17, 4:26 PM
    if your plan involves repaying loan with another loan (mortgage) then I do not think you can really afford your plan.

    I would be uncomfortable with less that 15% equity in it myself. so would rent the cheapest room I could find and save harder.
    Downsized and mortgage free
    August 17 grocery challenge 0/£100
    • Phil Caddy
    • By Phil Caddy 17th Apr 17, 6:14 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    • #6
    • 17th Apr 17, 6:14 PM
    • #6
    • 17th Apr 17, 6:14 PM
    if your plan involves repaying loan with another loan (mortgage) then I do not think you can really afford your plan.

    I would be uncomfortable with less that 15% equity in it myself. so would rent the cheapest room I could find and save harder.
    Originally posted by BrassicWoman
    thank you for the reply, i can afford it, it's just that by remortgaging i can pay the government off faster to save paying them interest and more money in the future, as the property value increases, surely that makes money sense? i think...
    • Windofchange
    • By Windofchange 17th Apr 17, 6:58 PM
    • 488 Posts
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    Windofchange
    • #7
    • 17th Apr 17, 6:58 PM
    • #7
    • 17th Apr 17, 6:58 PM
    Assuming of course that your house has gone up in value / stayed static and not crashed in the next 5 years.

    https://www.ftadviser.com/investments/2016/10/04/uk-property-bubble-will-burst-by-2017-warns-economist/

    How confident are you that in your area your house will not be in negative equity, thus meaning you can't re-mortgage it for more money?
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    • BrassicWoman
    • By BrassicWoman 17th Apr 17, 8:52 PM
    • 1,224 Posts
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    BrassicWoman
    • #8
    • 17th Apr 17, 8:52 PM
    • #8
    • 17th Apr 17, 8:52 PM
    thank you for the reply, i can afford it, it's just that by remortgaging i can pay the government off faster to save paying them interest and more money in the future, as the property value increases, surely that makes money sense? i think...
    Originally posted by Phil Caddy

    You asked for opinions and my opinion is that your deposit is too low to buffer you from future problems. My opinion will not chnge just because you ohrase the question a little differently.

    If house prices do not go up, you will not get a remortgage. We are entering the most unstable time economically this country has known in a century.

    If you lose your job or have to move fast you're stuck in negative equity.

    Save more. Put 15 - 20% down, borrow no more than 3 times the highest salary.
    Downsized and mortgage free
    August 17 grocery challenge 0/£100
    • Phil Caddy
    • By Phil Caddy 19th Apr 17, 10:58 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    • #9
    • 19th Apr 17, 10:58 PM
    • #9
    • 19th Apr 17, 10:58 PM
    thank you for you're replies, i'm by far no genius i just have an idea and wanted opinions, what you have said does make sense to me but time is against me with saving, with help to buy scheme i'll pay more money back the longer i take to pay it back so just thought if a remortgage was possible then paying the government back sooner will save me money in the long run...
    • PeacefulWaters
    • By PeacefulWaters 20th Apr 17, 7:24 AM
    • 6,591 Posts
    • 8,087 Thanks
    PeacefulWaters
    thank you for you're replies, i'm by far no genius i just have an idea and wanted opinions, what you have said does make sense to me but time is against me with saving, with help to buy scheme i'll pay more money back the longer i take to pay it back so just thought if a remortgage was possible then paying the government back sooner will save me money in the long run...
    Originally posted by Phil Caddy
    Well done on finding the full stop button.
    • mrmagooooooo
    • By mrmagooooooo 20th Apr 17, 8:04 AM
    • 93 Posts
    • 66 Thanks
    mrmagooooooo
    I have done pretty much exactly the same as you op

    Bought a house for 200k had a 10k deposit and used help to buy and have the same plan, although the HTB will be partially paid with Shares and bonuses so no saving specifically for it. The rest will then be remortgaged.

    I did this around 2 years ago. Granted what people are saying on here is correct. The bubble may burst at any moment. You may also get run over by a bus. You take your own chances so its up to you but I like yourself saw nothing wrong with the plan.

    Hope that helps
    Last edited by mrmagooooooo; 20-04-2017 at 2:29 PM.
    • Phil Caddy
    • By Phil Caddy 22nd Apr 17, 10:56 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    thank you
    I have done pretty much exactly the same as you op

    Bought a house for 200k had a 10k deposit and used help to buy and have the same plan, although the HTB will be partially paid with Shares and bonuses so no saving specifically for it. The rest will then be remortgaged.

    I did this around 2 years ago. Granted what people are saying on here is correct. The bubble may burst at any moment. You may also get run over by a bus. You take your own chances so its up to you but I like yourself saw nothing wrong with the plan.

    Hope that helps
    Originally posted by mrmagooooooo
    thank you for the reply. i've tried todo as much research as i can on this and you have helped the most. it's given me some hope with my plan and i'm going to go ahead with it. so have you paid the equity loan off now after you remortgaged?
    • ViolaLass
    • By ViolaLass 22nd Apr 17, 11:04 PM
    • 4,978 Posts
    • 6,863 Thanks
    ViolaLass
    You only save money if the remortgaged section is on a lower interest rate than what you would have had to pay the government e.g. if the interest in year 6 (to the government) is 1.75%, then you need a mortgage that costs less than that.
    • mrmagooooooo
    • By mrmagooooooo 24th Apr 17, 11:17 AM
    • 93 Posts
    • 66 Thanks
    mrmagooooooo
    thank you for the reply. i've tried todo as much research as i can on this and you have helped the most. it's given me some hope with my plan and i'm going to go ahead with it. so have you paid the equity loan off now after you remortgaged?
    Originally posted by Phil Caddy
    The Equity loan is still in place at the moment, we will look at remortgaging once the 5 years is up.. but as per the post above.. only if it is cheaper to do this. If the Interest rate from the help to buy is cheaper than the remortgage then we will continue with it.
    • Swasterix
    • By Swasterix 25th Apr 17, 10:09 AM
    • 1 Posts
    • 0 Thanks
    Swasterix
    You only save money if the remortgaged section is on a lower interest rate than what you would have had to pay the government e.g. if the interest in year 6 (to the government) is 1.75%, then you need a mortgage that costs less than that.
    Originally posted by ViolaLass
    The above isn't strictly true. OP, I'm in a similar situation as you, and have done a fair bit of number crunching so here is my take.

    The amount you pay back is a percentage of the propertys current market value, and not the original amount you have borrowed. If the value of your property does increase in the first 5 years, then the savings you make on the interest rate may be wiped out due to the increased value of the governments 20% stakes.

    Basically, there is no right or wrong answer as nobody can say what is going to happen to the value of your property over the next 5 years. My take would be that if you are intent on going for the equity loan, save the money as planned, then get your house valued and see a good financial advisor at the point that you are in a position to repay. You will then be able to make a clear decision as to which is the most financially beneficial option to you.

    Alternatively rather than saving money, you could instead make overpayments to your mortgage in the first 5 years to increase your equity stake. This could be beneficial as the % interest will be higher on your mortgage than you will get from your savings, meaning you will save money in the long run.

    Like I say, see a financial advisor
    • Phil Caddy
    • By Phil Caddy 26th Apr 17, 4:27 PM
    • 7 Posts
    • 1 Thanks
    Phil Caddy
    everything makes sense what you've all said and i take it on board. i think making overpayments for the mortgage could be a good idea. then if the remortgage after 5 years isn't a good enough % then i'll pay the interest to the government for year 6. this way i'll have more equity as well as more saving time to see what deal i can get after year 6. then hopefully get a better deal with a remortgage and pay the government off in full. thank you all for you're advice
    • HarryChana
    • By HarryChana 27th Apr 17, 11:50 AM
    • 1 Posts
    • 1 Thanks
    HarryChana
    Hi Phil,


    I'm currently going through the same thing. My remortgage completes tomorrow, and with the additional borrowing I will repay the government loan. For me, it made sense to do this as soon as possible because I think house prices (in the long run anyway) will continue to increase in the area I live in. Hence it makes sense for me to redeem at as low a value as possible and keep all of the capital gain if/when I decide to sell in a few years time.


    However, everyone's cicrumstances are different. Ultimately, my deicision was based on whether I could afford the increased mortgage payments. After checking the my revised monthly payment versus my income I'm confident I can pay (and still have plenty of money left for food/living expenses etc.) in any circumstance. If I wasn't sure, I wouldn't have done this.


    As a few people have mentioned already, there isn't a right or wrong answer necessarily as nobody can predict the future. You can only be comfortable with the decision you make at the time and make sure you won't have sleepless nights worrying about affordability.


    Good luck!


    Harry
    HarryC
    • chrisjwright
    • By chrisjwright 27th Apr 17, 3:15 PM
    • 6 Posts
    • 3 Thanks
    chrisjwright
    This is exactly what me and my partner have done. We borrowed the 20% and are currently putting £200 a month into shares in her work (we at worst would only get back in what we have put in). At the moment though the shares are doing well (fingers crossed). This will be a good chunk towards paying back. We are also over paying on the mortgage every month to help towards bringing the equity down. We where advised that this was the best solution for us by a family friend who is a mortgage broker. I'd go see a mortgage broker or financial adviser to help.
    • Jon B
    • By Jon B 30th Apr 17, 7:21 AM
    • 779 Posts
    • 703 Thanks
    Jon B
    You are in essence doing the same as what we are doing. Except that rather than putting the money into savings which at best are around 0.75% interest, we are overpaying our mortgage which is at 2.84%.

    Our house in the last two years has gone up by £50k though, which means the amount we now owe the government is £10,000 more.
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