re-mortgage and help to buy

md87

Hi all,

Just wanting some general advice before going ahead. Position is I am moving house, upgrading if you like. I am essentially using my equity as my deposit to finance the move and with this I can achieve a LTV of 70%.

Now my new home to be is a new built with right to buy etc. I don't fully understand right to buy. Can you benefit from the interest free loan even though I essentially have a big deposit? Can you use right to buy to lowet my LTV even further? I assumed that help to buy is not really relevant to me.

When I move I have to port original mortgage or pay 4k to be released, and it's horrible over 5%. Then take 2nd mortgage for additional borrowing which I can get for around 3%.

My real query is, is help to buy relevant for me when I am 70 LTV anyway, as that's what I don't fully understand.

If you need any further info to answer let me know. Any help much appreciated.

stator

Right to Buy is completely different, that's people buying council houses.

Help To Buy equity loan requires a mortgage of at least 80%, so no it doesn't apply to you.

md87

Sorry help to buy is what I ment to say. So technically could I take a mortgage at 80% and keep the spare money in my pocket? And then benefit from part of the amount being interest free for 5 years?

I assume would not be worthwhile due to my 70%LTV anyway. But just looking into it. Thanks.

md87

Sorry help to buy is what I ment. So could I take 80% mortgage and bank the additional funds? And then benefit from the interest free 5 years etc?

I imagine not worth it anyway if I have 70% LTV without any help to buy? What do you think? Thanks

stator

Assuming you don't own other property and plan to live in your new home you could take out a Help To Buy mortgage and keep the spare cash in a bank account. But compare the mortgage rates, will you earn enough interest on your savings to offset the higher cost of the mortgage?

kingstreet

All kinds of misconceptions here.

Help To Buy Equity Loan is available on newbuilds only. It provides a loan, interest-free for five years of either 10% or 20% of the purchase price of the newbuild property.

You have to take a mortgage of at least 25% of the purchase price and have to put down a minimum deposit of 5% from your own resources.

When you repay the equity loan, you repay the % of the value at that time, not the £ you borrowed initially.

Now, porting.

When you move house, your existing mortgage is repaid. If you qualify for a new mortgage with your current lender, you may be able to port the rate from your existing mortgage to the new one to avoid ERPs. Any increased borrowing will be offered on one of the lender's products current at the time.

You would need to be with a lender operating on the HTB - Equity Loan scheme willing to accept a port in such circumstances.

I suggest you speak to an independent mortgage broker to get this pieced together properly.

amnblog

kingstreet wrote: »

I suggest you speak to an independent mortgage broker to get this pieced together properly.

Porting a +5% rate or paying a £4K fee!


This is sound advice - get yourself a broker working on this.

md87

Thanks for the input so far, much appreciated. I have other queries if anyone can help/advise - regarding whether I should pay the Early Repayment Charge etc.

Position is. About 4 years ago I purchased my first house for 105k - deposit of 30k and 10 year fix mortgage for 75k at rate of 5.29% with Britannia/Co-op (yes the rate is terrible). Basically I knew nothing about mortgages at the time and although we had a good deposit, our income was actually very low (so the monthly re-payments were under £400). In addition my wife was merely on a bursery which most lenders would not count as income - so we have done well with the property itself but on the mortgage front we have been paying far too much interest.

Now I have sold my house for 125k. I probably spent the 20k on it in terms of home improvements but at least I have got that back in equity.

I am buying a house, a new build, at 170k. Basically I knew I would have Early Repayment Charge (which is 6% of remaining balance at this stage). Figures at this stage are approx but I still owe 71k on the mortage - so say ERC of about £4,260. Due to this I planned to port and take out a further mortgage (also with Britannia) for the additional borrowing - which I can get at a rate of 3.19% 5 year fix - based on this our monthly repayments (atleast for the next 5 year) for both mortgages combined would be £600.00 per month. This would be one mortgage at 5.29% and another at 3.19%.

Now having done the maths, I think it will be financially better to ditch my current mortgage and to pay the ERC. The ERC will essentially come off of my equity so it is not like I have to find the £4,000. What do you think?

Because I have seen a mortgage with the Tesco Bank for example. Say I pay the ERC my equity will still be £49,740 which I can make up to 50,000 if necessary. So buying at 170,000 with 50k deposity would need to borrow 120k. I would have a LTV at 71%. I have messed with the figures (i.e. try borrowing 119k to get LTV to 70% but it makes the monthly payment about £5 cheaper so not worth it).

So if I pay the ERC and dent my equity slightly, maybe add a couple of hundred to have 50k deposit and take the Tesco Bank mortgage. This is as follows:

2.89% fixed for 5 years (then to SVR) with an arrangement fee of just £195.00 = monthly repayments for the 5 year fix would be £498.83.

So to calculate the difference between the two. Monthly repayments would be £100 lower every month, so a difference of £1,200 a year and £6,000 over the 5 year fix. The ERC is only approx £4,260 so this means better to pay the ERC and start from scratch?

What do you think? A good move? Are my calculations correct? For me £100 lower per month seems quite a difference, especially as I plan to try and overpay as much as possible.

Once again any advice is very much appreciated. I have all the docs in front of me to go ahead with Britannia, but will have to go through it all again (I spent about 3hrs on the phone!)

kingstreet

HTB- Equity Loan isn't supported by Britannia/Co-op or Tesco, so they are not an option if you choose that route.

md87

Yea I am thinking of just forgetting about the Help to Buy as I have my concerns about it.