Use capital gain to pay-off HTB EL in year 6?

rfyapbtl

We're looking at properties up to 300k, with a 20% deposit, 20% HTB EL and 60% mortgage.

I know the EL is interest free for 5 years after which becomes 1.75% adjusted for RPI. Obviously this becomes a concern as it would add a further £300 to our monthly mortgage payments.

Question:
Assuming our new home could appreciate at ~5% p.a**. and could generate a capital gain of £60k, is it reasonable to plan to re-mortgage in year 6 and use the capital gain to clear the EL (also 60k)?

**The county-wide average for Herts is 8-12%.

PETIE

Where are you getting the £300 per month figure from?

you pay the interest on the equity loan itself

Property price of £300k
20% equity loan is £60,000
1.75% of £60,000 = £1050 per year
which is £87.50 per month

rfyapbtl

PETIE wrote: »

Where are you getting the £300 per month figure from? you pay the interest on the equity loan itself

Ahhh, my mistake... I wrongly assumed it was interest+principal over X yrs.

TrickyDicky101

I think it's very risky to assume such house price growth - especially when you would be buying a new build which will include new build premium when you purchase it.

Thrugelmir

rfyapbtl wrote: »

Assuming our new home could appreciate at ~5% p.a**.

On what basis do you expect house prices to grow at 5% per annum.

Thrugelmir

rfyapbtl wrote: »

Assuming our new home could appreciate at ~5% p.a**.

On what basis do you expect house prices to grow at 5% per annum.

20% of the gain is paid to the Government, so £12k would still need to be found. Even if your optimism was proved to be correct.