Help to Buy loan - advise on Staircasing

Anthony_Toiso

Hi all


I wanted to get some advice on paying off the help to Buy loan I got with my house.


My situation:


I bought a house in 2012 for £160k with a 30% Help to buy loan (roughly £48k loan) which is interest free for the first 5 years.
Once the free period ends, I will then have to a yearly fee(1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%) that equates to around £110pm (this pays off no equity in the loan).




The options to pay it off are:
1. Sell the house - they take their 30% of the sale value
2. Staircase - pay back a 10% chunk at the current market value
3. Just keep paying the fee until I die


My life plan / financials:
I have a household income rolling around £30k and don't plan on moving from this house in the next 10-15years. £3k unsecured personal debt, v.good credit score.


My question:
What is the best way to tackle the HtB loan? I don't really like the idea of paying a fee forever as it's only going to get dearer, I also don't want to sell the house as I want to live in it! Also my LTV for the next one will be awful (current mortgage is 59.9% so great rates). So my only option is Staircasing.


Should I be planning on paying off mortgage and then remortgaging once I've got enough to add a chunk of the HtB loan to the mortgage? Or should I be ignoring this as and concentrate on something else?




Any advise or further reading would be very welcome from the community.

skizz_b

I do hope given you have already made the purchase you are aware that in any event the Help To Buy loan needs to be repaid after 25 years regardless? That therefore rules out option 3.

I would suggest in the time before you need to start paying fees you stick as much money on one side as possible to take a chunk out when they demand it.

jtjrlm1

Hi,

The approach I have taken to this situation, was to overpay as much as possible in the first 5 years of my mortgage, whilst also saving a lump sum.

So in a nutshell, I am one year away from my 5 year anniversary, and have instructed a RICS valuer to value my house, so I can approach a financial adviser to approach a bank to negotiate my remortgage with additional lending to repay the equity loan.

I have taken the steps of approaching my current lender and they are more than happy to let take out additional borrowing, so I should be in a position to find the best deal.

Although many people have reservations about this scheme, it has proved a great helping hand to me and my partner, and hopefully within the next few months, we will own the house without a second charge and also have lowered our LTV down to around 80 -85%

Good luck with your plans

Anthony_Toiso

Thanks for the info skizz_b and jtjrlm1


I wasn't aware that it had to be paid back after 25! TBH, my IFA was rubbish, but I'd have agreed anyway to get the house.


I was thinking overpayment would be best and shave a few years worth of interest off whilst times are good (with my LTV I got 2.49% rate).


I count my blessing that they did the scheme, it's just frustrating you can't pay equity off by direct debit against it.


What about taking out 0% lending when the 5 years is up (credit cards etc) or is that just blooming stupid?

skizz_b

To be honest we are in the middle of buying a new build and (unsurprisingly) nobody mentioned it in the first instance - not the home builder, not THEIR broker, not the bank - it was only when we went to an independent broker who was a friend of a friend that we found out that it was due back after 25 years no matter how many years the mortgage term was.

jtj has a good idea, I think the way you want to play it is looking at these 5 years as a chance to take a massive chunk out of it while not needing to pay the fees, the other option would be to work out how much you would need to put aside per month on top of the fee to clear it within 25 years of your mortgage although this could add up steeply.