Help to Buy Equity Deposit + Offset Mortgage

aj2k2001

Hi All - a very quick question.....

The detail on the Help to Buy equity deposit is very light currently and I was trying to see if this scheme would be eligible with an Offset style mortgage? The detail i can find states that a capital repayment mortgage is required and i'm therefore assuming that as an offset mortgage isn't directly paying off capital, that means that the HTB Equity Deposit scheme would be not be applicable in conjunction with and Offset mortgage?

Any ideas!?

kingstreet

I don't think the system for monitoring mortgages is that sensitive.

If you get a mortgage offer for the amount needed over 25 years on a repayment basis, I don't think you'd have any problem if it had an offset facility.

DevilsAdvocate1

I have an offset mortgage, which I treat as a repayment mortgage (and try to overpay as much as possible). I remember them asking me if I wanted it on an interest only basis or repayment. So I think you can get a repayment offset. I wanted mine as interest only to give maximum flexibility.

It is with First Direct.

kingstreet

DevilsAdvocate1 wrote: »

I have an offset mortgage... It is with First Direct.

Whose terms have recently changed for new borrowers. Reducing the potential problem.

In addition, HSBC Group does not accept Shared Equity business at the moment and I'm told is unlikely to start doing so, so HTB borrowers will not have the problem.

aj2k2001

Great, thank you both. A much more positive response than i was expecting! I would be looking to repay and where possible, over pay as much as possible. So, to not have to service (for 5 years at least) 20% of the debt and be able offset the mortgage is a real bonus.

Thanks again and fingers crossed!

kingstreet

It would seem sensible to get a 20% equity loan at the outset and then stick the equivalent in an offset account until such times as the interest payment on the equity loan exceeds the interest payment on the mortgage.

For example, with 6% inflation, the payments on the equity loan would attract interest at 1.75% in year 6, 1.86% in year 7 and so on...

It may take a long time for the rates to converge.

However, as the growth in the value of the property will determine the cost of the repayment of the equity loan, the two figures need to be considered in the overall plan to seek the best value for money.

aj2k2001

Good point and that would be the intention. I'm currently looking in London, so the huge amount of rent that is currently wasted each month more than covers the debt servicing costs at current interest rate levels. But, it will also help to offset any potential for a slight reduction in house prices in the fact that any overpayments will be capital in the bank (although, obviously not entirely realised until any mortgage is settled) instead of rent down the drain.