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Government help to buy scheme

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Hi - my earlier thread was not clear so thought I would post it again..

We have purchased a new build under the government help to buy scheme in which I have paid 5% deposit and the government have put down a further 20% which I start to pay interest on at the end of year 5.

I am aware that I can staircase at intervals to reduce the governments borrowings or pay the 20% off at any point. However, what are home owners who purchased through the scheme doing to repay the 20%? Or what would other homeowners do?

My plan is to pay off 20% of my mortgage over the coming years and then remortgage to pay off the government 20%, what are your thoughts?

Over time I will be inheriting money which means I can pay the 20% off however what are other home owners thoughts over the quickest option to pay off the 20%?

I will be making over payments on the mortgage over the next 5 years prior to the interest on the 20% becoming a monthly cost.
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Comments

  • I have other investments that will mature within the 5 years, plan on overpaying mortgage by 10% per month to add to equity to cover any shortfall should house price rise.

    My plan is to clear the government equity loan before the juice starts in 5 years.
  • Sounds sensible - when the retail price index kicks in after 5 years do you think this will make significant monthly payments? Based on my borrowings and current RPI I estimate year 5 will cost £51 per month so not too bad..
  • Does the 20% go on the value of the property at the time? So if in 5 years your house has gone up say by £5k you will owe an extra £1k. Would this reduce if lost in value?

    I don't think this would be a concern as most new builds are usually premium paid as you are 1st to live in them but may be worth considering...
  • MoneySaverLog
    MoneySaverLog Posts: 3,232 Forumite
    Yes, that's how it works and one reason to pay it off sooner rather than later.
  • kingstreet
    kingstreet Posts: 39,254 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Yates78 wrote: »
    Sounds sensible - when the retail price index kicks in after 5 years do you think this will make significant monthly payments? Based on my borrowings and current RPI I estimate year 5 will cost £51 per month so not too bad..
    It's 1.75% in year six. Assuming RPI is 5% per annum, in year seven, the fee will be 1.87%, in year eight 2.01% and so on...
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Yates78
    Yates78 Posts: 23 Forumite
    King street thanks and again that is my understanding. So based on your estimates of RPI on your last post what would the monthly repayments be on the government 20% after year 5 if for example the govt loan was £34k from year 5 onwards?..
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    what are you trying to achieve?

    clearly the 'fees' after 5 years are very cheap and presumably are less that your main mortgage rate?
    so presumably your assumption is that house price inflation will be high so making the repayment of the taxpayer loan more advantageous than repaying the mortgage?

    it would then seem best to pay off the taxpayer loan asap rather than overpaying the mortgage
  • kingstreet
    kingstreet Posts: 39,254 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Yates78 wrote: »
    King street thanks and again that is my understanding. So based on your estimates of RPI on your last post what would the monthly repayments be on the government 20% after year 5 if for example the govt loan was £34k from year 5 onwards?..
    I don't need to estimate it.

    Read the guide;-

    http://www.homesandcommunities.co.uk/sites/default/files/our-work/help_to_buy_buyers_guide_sept_2013.pdf

    Pages 14/15.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Yates78
    Yates78 Posts: 23 Forumite
    Thanks kingstreet and Clapton. I am forward planning, appreciate your input into this. I think over the next 5 years I will try and save up a sum of money and see how that measures up with my equity in the house at the time then possibly pay off 10% then do the same again over the next 5 years.
  • Sparx
    Sparx Posts: 909 Forumite
    Part of the Furniture Combo Breaker
    Just wanted to chime in as I'm committing to a New Build home with the HTB Equity Loan scheme at the end of this month..

    So it is best to pay off the 20% EL first or overpay your mortgage?

    The EL has very low interest as it's RPI, where as the mortgage (for me) starts at 2.85% then after 2 yrs ups to 4% or whatever the SVR is, unless I re-mortgage again and add the 20% EL?
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