ADVICE: Mortgage Overpayments vs Buying back Shared Equity (Help to Buy Scotland)

Adrian_Gail

Hello,

I'm seeking some advice from those more expert than myself in these matters!

We are currently in the process of buying a new build house in Scotland and we've qualified and been accepted on the Help to buy scheme (Scotland) only just before they changed the criteria in Oct-14.

During reviewing our outgoings etc through the whole process we've managed to free up a fair amount of disposable income, which rather than fritter away, we were hopefully looking to improve our situation. This I thought could either be done by saving the income in a suitable account and buying back tranches of equity in the property or by overpaying the mortgage and reducing the capital.

So firstly, the Scottish HTB scheme differs from E+W by the fact there is no "20 year security rule" and the equity share can remain indefinitely until sale of the property, so there's no worries of really having to clear that off... but now where I seek advice, is what would be best for the short/middle term and which would be best in the event that I may re-mortgage after the initial fixed period (2yrs)?

Overpayments / Repaying Capital: If there was no equity share, this would be a no-brainer. Reduce the interest payment and reduce the term. Now overpaying will reduce my capital debt to the lender and will put me in a better position come re-mortgage. There are no stipulations for re-mortgage under the HTB (Scotland) scheme other than it has to be one of their approved lenders. My concern is that I don't have a nice pot of money sitting in a savings account/ISA which I can draw on should anything un-expected come up (!) I won't be over-paying the full disposable income for this reason though and be saving some aside for contingency / potential futur equity purchase.

Equity Purchase: Equity can be bought back in 5% Tranches, which will require a level of "saving" over time. My concern with this route is that I won't have released all the equity back before having to re-mortgage so when re-mortgaging I will still have a ~72% LTV vs 69% LTV if I overpay over the same period (very roughly making a few assumptions about overpayments and House value not increasing etc)

Sorry for the long post... but trying to work out in my head if it works out better one way or another, will a 3% difference in LTV matter for re-mortgage? Will having security of cash in the bank be better? Am I just totally off the mark?

Thanks in advance