Remortgage to pay back help to buy loan..?

markdavidhowell

Hi guys,

I've hunted on google but found very little on this, I hope you can help!

My wife and I bought a house worth 250,000 with a 20% government help to buy' loan 2 years ago. We borrowed 180,000 for a fixed 2 year term which is now up for renewal.

We have spoken to a mortgage adviser who has given us the following options.

1. Continue with our current level of borrowing i.e. do not pay the government back yet. Lower interest rates means that our monthly payments will go down by around £200 if we fix for a further 2 years.

2. As our circumstances have improved, we could increase our mortgage size to pay back the government share (54,000 once our house price increase has been taken into account) so that we own 100% of the equity. This would mean upping our monthly payments by around £200 if we fix for 2 years and keep the same term (23 years).

The question is, which option makes most sense from an investment point of view? We'd be fairly comfortable with the higher monthly payments but lower payments are still attractive! We'd love to 'own' 100% of the house too so we benefit from the equity if house prices continue rising in our area. But is it silly to pay more per month to live in the same house?

Thanks in advance for any advice you can share.

Mark and Sophie.

kingstreet

The comparison is three extra years interest-free v growth in property value over that period.

Crystal ball time.

markdavidhowell

Thanks kingstreet. The house has gone up from 250,000 to around 270,000 since we moved in, according to the mortgage adviser's estimate and zoolpla. I guess its safe to assume that the price may continue to rise (if not by exactly the same magnitude) over the next 2-3 years.

kingstreet

In which case, you need to compare the cost of the increases on the 20% you will lose v the additional payments you will make in the intervening period.