Help to Buy Equity Loan - Advice

patonar

Hi All,

We are just about ready to put down a deposit on a new build in our area. House Price £282,000 with a 5% deposit and 20% equity loan.

I keep getting waves of doubt - mainly due to un-answered questions...

My main concern of today is all around what happens at the end of a fixed term mortgage deal.

The deal my broker is recomending at the moment is a 2 Year Fix from Halifax/LLyods - @ 2.29% with around £1500 fees and £2100 cashback, which seems OK - i am not sure if there are better offers out there or not?

Anyway - my concern:

When i get to the end of my 2 year fix - i can either drop on to the standard variable rate ~ 4.99% which will hike my monthly repayments through the roof, switch to a new product with Halifax or re-mortgage... Just want to run these scenarios past you clever lot:

1) Switching to a new product - my broker says i should have no problem here an Halifax are sure to offer a new fixed rate deal to keep me as a customer, but if i google, all i see is horror stories about peoples fixed rate deals coming to an end... and having no products to drop onto..

2) Remortgage - i understand the due to the 2nd charge, there are very few HTB EL lenders who will accept a re-mortgage, and then there is the aspect of solicitors fees to add on...

Has anyone actually got to the end of a Fixed term on HTB yet, and if so what are your experiences?

I know i am probably overthinking but my worries are:

a) Negative Equity over a 2 year fix, and being able to get a decent rate.
b) Being locked into something

Thoughts?

Andy

libf

1) These are the first set of people coming to the ends of their loans. I suspect the situation in a further 2 years will be easier (although this is only my opinion!)

2) A little of the above again, but also... How much can you save in the 2 years? Would you be in a position to pay the HTB off?

I'm also about to buy a new build with HTB, but will be taking a 5 year fix and putting down 10% with a view to paying off the loan at re-mortgage if house prices have increased enough for this, or if not then paying 1/2 of it off at least at that point through savings.

patonar

Thanks for this...

Originally we had budgeted £1000 p.c.m for Mortgage payments (Open Market) but HTB can give us £730p.c,m - so we were planning to overpay £270p.c.m for the two years...

Hoping that coupled with the overpayments may give us enough to get close to the 10% (first chunk)...

I guess as more and more people take up HTB the number of products should logically increase, i suppose there will always be a risk that lenders become really (evenmore sore) risk averse.

Jon_B_2

Property I bought is a similar price to yours.

I have decided to go down a 5 year fix route at 2.84%, I am going to overpay as much as I can so that at the end of the 5 years I will be able to preserve a 75% LTV whilst either paying half or the whole of the Equity Loan. That's not taking into account house price rises. Nothing is guaranteed...

patonar

Can i ask where you got the 5 year fix from?

Just seems wiser to lock in now - i dont think they are going to get much cheaper than this for HTB, but almost certianly will see some upticks ont he base rate in the next 5 years.

mrginge

patonar wrote: »

Hi All,


Anyway - my concern:

When i get to the end of my 2 year fix - i can either drop on to the standard variable rate ~ 4.99% which will hike my monthly repayments through the roof...

Do you believe 4.99% is unaffordable?

If so, consider where interest rates will be in two years. You may find that the best fixes available at the time are not that much lower.

I think it is reasonably sensible to assume a 1% increase in BR and it is probably more prudent to work off 2% (not that i personally believe that's where we'll actually be).

Your 2.29% 2yr fix today could turn into a 3-4% 2 yr fix when you are ready to remortgage (plus fees of course).

Will your income have increased by an equivalent?

libf

patonar wrote: »

Can i ask where you got the 5 year fix from?

Just seems wiser to lock in now - i dont think they are going to get much cheaper than this for HTB, but almost certianly will see some upticks ont he base rate in the next 5 years.

Mine will be with Nationwide.

patonar

No it wont be unaffordable - i am just thinking of the best strategy to pay down as much equity as possible...

The lower the interest rate (and therefore payments) allows me to overpay more.

kingstreet

FWIW Halifax SVR is 3.99% not 4.99% although no-one knows what it might be in a few years.

If the worst comes to the worst, the rates on the equity loan (interest-only of course) are 1.75%, 1.87%, 2.0% etc if inflation is running at 5% and not the current 0.1% per annum.