Help to buy or small mortgage

nanders01

Hi

I was looking for some advice about whether a help to buy equity loan may be applicable for my situation or not. To explain, I'm a 43 year old married father who was taken ill at the start of 2014 with fatigue, pain and light headedness following a bout of flu. Eventually I was diagnosed with a low grade paraprotein in August and am being monitored every two months for progression to a terminal illness.

Needless to say its shaken the family situation up as I've recently reduced my working hours to part time. I also want to look at my mortgage situation and downsize that and am trying to work out the best option for us.

Our house is currently on the market for 345k, the balance outstanding on the mortgage is currently 115k so after moving fees etc we have in the region of 220k equity in the home. My salary is 40k pa (though this will reduce to 22k in the summer) and my wife earns approx 14k pa. Her take home just covers all of our monthly outgoings, excluding the mortgage. I have a reasonable pension but this is not accessible for 12 years and we have little savings but similarly no debts other than the mortgage.

Given there is an element of uncertainty re my health, i am keen to ensure the family are on the best financial footing should we be faced with the worst case scenario over the coming years.

Therefore I have been looking locally at smaller new build properties close to where we live to take advantage of help to buy options (plus it means the kids won't need to change schools etc). The house I've seen is valued at 280k so minus our equity we'd have approx 60k to find. My question is can we do this through a government help to buy loan scheme option to keep costs low (technically we're slightly above the 20% threshold though I'm sure we could negotiate), do you need to have a small mortgage to qualify for this scheme or would we be better off taking out the 60k through downsizing our existing mortgage?

I think we're comfortable having a loan over the next 25 years (inheritance etc) but it would mean we'd have to stay put in this property. Also the idea of having very low monthly repayments for the next 10-20 years really appeals given our circumstance.

Sincerely appreciate any advice / pointers re help to buy.

Thank you

kingstreet

HTB Equity Loan has a minimum mortgage requirement of 25% of the purchase price.

nanders01

Thanks. What about the mortgage guarantee scheme, how does that work? Could we have equity in the property of 80% and then borrow a loan through that of 20% of the property?

Pixie5740

No your deposit of 80% is too high. These schemes are designed for people with deposits of 5% to 15%.


http://www.helptobuy.org.uk/

nanders01

Could we not keep our existing mortgage above the 25% threshold at the point of taking out the equity loan and then with the proceeds from downsizing, reduce the mortgage level over time? Would the government check annually to ensure your mortgage statement is always within range?

Appreciate the help

Pixie5740

I'm not sure. I've not given much thought on the best way to defraud the HTB schemes.

nanders01

Thanks for that but the terms and conditions apparently say for people who have a mortgage between 25-75% of the property and then at least a 5% deposit. Seems odd we'd have to have a sizeable mortgage to qualify

kingstreet

Mortgage Guarantee is simply a 95% mortgage, so useless here.

Equity Loan will provide a loan of 20% of the purchase price of a newbuild, but you will need a mortgage of at least 25% of the purchase price. What you do with the mortgage after completion is entirely up to you. if you plan to pay it off, avoid products with early repayment penalties.

However, don't forget in E&W the equity loan only remains interest-free for five years and when you pay it off, it's 20% of the property value at the time, not the £ you originally borrowed.