Newbies in need of help!

Courtmill

My partner and I have recently looked into buying a home on a Private (non government) Shared Equity Scheme, on an 80/20 split.

The deal so far looks great and the rate we've been offered for the mortgage along with the deposit is practically too good to be true but very affordable. (It's also a new build, to our specs with is better!)

Problem is- we're confused about how the other 20% works. We have a 5 year interest free loan for the amount- currently at £30,000, and after the first 5 years we then have 5 years to pay it back, with interest.

Our IFA suggested 2 options- either make overpayments on the mortgage, then at various intervals remortgage and pay the difference. OR. Save our socks off and chuck a lump sum at it after the first 5 years and pay the remainder separately to the mortgage.

We have to pay back 20% of what the property is worth when we start making repayments.

Our question is... how does remortgaging and equity all figure out?
After 5 years, we'd have paid £30,000 in mortgage plus interest, but our overall amount paid on the mortgage will only have decreased by £14,000. So where does that leave us in terms of remortgaging. How does the value of the property benefit and help us repay the 20%??

Sorry if this all sounds like garbage, we're just in need of some answers and soon! We dont understand what equity actually is and how it benefits us?

Thanks in advance for any advice or information!!! :beer:

Thrugelmir

Courtmill wrote: »

My partner and I have recently looked into buying a home on a Private (non government) Shared Equity Scheme, on an 80/20 split.

The deal so far looks great and the rate we've been offered for the mortgage along with the deposit is practically too good to be true but very affordable. (It's also a new build, to our specs with is better!)

Problem is- we're confused about how the other 20% works. We have a 5 year interest free loan for the amount- currently at £30,000, and after the first 5 years we then have 5 years to pay it back, with interest.

Our IFA suggested 2 options- either make overpayments on the mortgage, then at various intervals remortgage and pay the difference. OR. Save our socks off and chuck a lump sum at it after the first 5 years and pay the remainder separately to the mortgage.

We have to pay back 20% of what the property is worth when we start making repayments.

Our question is... how does remortgaging and equity all figure out?
After 5 years, we'd have paid £30,000 in mortgage plus interest, but our overall amount paid on the mortgage will only have decreased by £14,000. So where does that leave us in terms of remortgaging. How does the value of the property benefit and help us repay the 20%??

Sorry if this all sounds like garbage, we're just in need of some answers and soon! We dont understand what equity actually is and how it benefits us?

Thanks in advance for any advice or information!!! :beer:

On the basis of the mortgages that your IFA has found for you. Can you realistically find money to make additional sizable repayments? Say £200 per month for example?

Or alternatively are you in jobs where increases in pay are guaranteed, as you'll be moving up the grading scales?

Courtmill

Yes, we have budgeted that we could be saving, or paying additional amounts of up to £500 a month and my partner is in an advancing job.

We should have no problem paying any of it off, in any way but we're trying to figure out which way is best and how it works best for us... we just feel very unsure and lost!

Thrugelmir

Has the IFA suggested to you an offset mortgage as an option?

This would allow you to save into a seperate account , benefit from interest savings on your mortgage and make capital repayments from the start of year 6 onwards.