Advice please

x90tsb

Hi all,


After some advice please.


In June this year I moved in to my first home (FTB). Purchase price £165,000 - this is made up of a mortgage of £107,000, H2B of £33,000 and deposit of £25,000. The mortgage I have is with Nationwide, 2.94% 5 year fixed rate.


I am now four months in and have approx. £500 left over after all out goings each month. I want to do something with this money, and don't know whether to:


A - Put the cash in a savings account, in year 5 (before the interest kicks in) use the money to pay off as much of the H2B as I possibly can. I will then have to add the remaining H2B balance to the mortgage.


B - Simply over pay the mortgage each month and add the H2B to the mortgage in year 5 before the interest on H2B element kicks in.


Any advice really would be much appreciated


Thanks,


Tom

kingstreet

Eeeeether, iiiiither.

FWIW you can only repay the equity loan in one (20% of property value) or two (10% of property value) chunk(s), there is no way to overpay ad-hoc.

The mortgage overpayment option may suit you better as a result.

David_White

Down to personal preference really.

The benefit of putting the money into a savings account rather than making over payments is that whilst you can still use it to make lump sum repayments as and when the balance builds up, if you were to have an emergency requiring cash (boiler break down, car repairs etc) all of your capital isn't tied up in the property.

The benefit to overpaying is self explanatory.

x90tsb

Thank you. King street if you were in my situation what would you do?

Have got money aside for emergencies

silvercar

If you repay the mortgage, when you get to year 5 you are relying on being able to remortgage and to increase your mortgage size to include the H2B help. What happens if you can't get the mortgage you need? You will be stuck paying ever increasing interest on the H2B loan. for this reason alone, I would be stashing away any spare cash to use to repay the H2B loan.

amnblog

'Ever increasing interest' on the Help to Buy loan does not among to much as the rate is super competitive.

The bigger question is if and when you want to purchase the final 20% of your home.

These schemes have not reached the stage where we can see if buyers are keen to pay the equity loan off, or keep outgoings down and keep the loan.

x90tsb

Thanks guys, think I will put money in savings and try and either buy 10% more of the house in year 5 or the full 20% if I can afford too..

Jon_B_2

Remember that if the value of your house goes up, 20% of that increased value gets added to the total to be repaid to HTB.

I'm going down the mortgage overpayment route with a view to remortgaging the full 20% in at year 5.

Thrugelmir

x90tsb wrote: »

Thanks guys, think I will put money in savings and try and either buy 10% more of the house in year 5 or the full 20% if I can afford too..

Can you earn over 2.94% guaranteed on your savings?

x90tsb

Thrugelmir wrote: »

Can you earn over 2.94% guaranteed on your savings?

What would you do in my position Thrugelmir?