Homebuy direct help.

stratdude

Hi all,

Well we recently took out a mortgage using the government homebuy direct scheme. The house is valued at 140K and we did a 75/25 split. So we mortgaged for 105k and homebuy paid 35k.

The 35k is interest free for 5 years and can be paid off in chunks of 10% as required. After 5 years we have to either pay it off or pay interest on it (estimnated at £102/month).

My query is that by the 5th year period we should have paid off 10K on the 105k mortgage and have around 10k in savings. Would it be best to overpay the mortgage by 10k and then add on the 35k or pay off the 10k on the homebuy and pay them off monthly?

Other option, hoping house prices stay above the 140k and we sell the house so we have 10k equity with mortgage and 10k in the bank? Any increase on the 75% is ours and the remainding 25% (plus any increase) goes to the homebuy people? This can then go towards another property, the mortgage is transferrable.

Any other ideas would be great or advice. I know its a few years off but I want to be prepared and have a goal.

powerwin

Won't it depend on what the interest rates are on the two loans in five years' time?

What sort of mortgage have you taken out? Have you checked how it treats any overpayments? What I mean by this is you need to know how an additional unexpected repayment will be treated by the mortgage company to know the effect it will have.

Gut feeling though says better to pay off the mortgage rather than the HomeBuy but it will depend on the details.

Rgds

stratdude

It's a repayment mortgage at 5.09% fixed for two years, the homebuy follows 1% above base rate after the five years.
The mortgage can be paid by 10% per 12 months with no penalties.