HTB - End of Year 5

TBF1982

Hi everyone.

This is my first post but I've been reading the forum regularly since thinking about buying my first home. :beer:

I wanted to check some logic if that's OK.

We're looking to purchase our house using the Help To Buy Scheme.

At the moment we have some outstanding debts that we will be now in a much better position to clear as moving into this house will be saving us hundreds in comparison to our current rent (we're moving out of London basically). Our plan is to completely clear these off within 3 years leaving us in the position (hopefully) of just the mortgage outstanding.

We would then look at the end of our 5 fixed rate and before the interest on the HTB kicks in, to remortgage at the same term but to remove the HTB loan element. I understand this will be subject to passing the affordability criteria set out which none of us will know until then but I need to check that my logic is fairly sound.

Many thanks for any assistance you can provide.

TBF1982

*BUMP* Anyone?

kingstreet

The year six interest is 1.75%, year seven 1.87% and year eight 2.0% assuming inflation at 5% per annum.

Will your mortgage rate be more or less than that?

Why not save/overpay during the five years and see where you're upto?

TBF1982

I see what you mean! Why potentially pay greater interest on the mortgage when the HTB will be a lesser interest rate.

I guess the reason I'd want to do it is if the house price rises to an extent that it's better to own the remaining 20% earlier than later (finding 55k is easier than finding potentially 70k).

I'd like to overpay when I can (which I actually think wil lbe most months) but I wasn't sure if overpaying or saving it to pay off the HTB would be best.

amnblog

"Why not save/overpay during the five years and see where you're upto?"

kingstreet

TBF1982 wrote: »

I see what you mean! Why potentially pay greater interest on the mortgage when the HTB will be a lesser interest rate.

I guess the reason I'd want to do it is if the house price rises to an extent that it's better to own the remaining 20% earlier than later (finding 55k is easier than finding potentially 70k).

I'd like to overpay when I can (which I actually think wil lbe most months) but I wasn't sure if overpaying or saving it to pay off the HTB would be best.

All you can do is play it by ear at the time by regular monitoring.

There are too many variables to embark on a fixed strategy for five years ahead.

For example, what happens if the property value falls? You may want to try to repay the lower loan amount then, so the savings/overpayments would then prove useful as you would need to combat your reduced equity.