Can I use Help To Buy Mortgage guarantee to bring down interest rate?

dowjones123

I have the following situation:

I have a £200,000 home (non new-build) to buy, and I have cash to spare (as deposit) of £10,000. (5%). I can use the HTB mortgage guarantee where the Govt guarantees £30,000 (i.e. they will take the loss if I default) which then helps the lender to extend a loan of £180,000. The interest rate they charge is commensurate with LTV of 95% and not 80%.

Now, what if I propose :

I put

A) deposit of of £40,000 and ask Govt to guarantee another £30,000; and borrow £160,000. Surely lender is better of than

I put deposit of £40,000, don't take mortgage guarantee and take loan of £160,000

Will the interest rate charged in A be less than in B? I would believe so.

Is there a deposit after which I CANNOT apply for the HTB mortgage guarantee?

Many thanks

Thrugelmir

A few facts which may explain the scheme a little better.

• Lenders pay a commercial rate to include mortgages in the scheme
• Lenders suffer 5% of the loss above the 80% threshold
• Guarantee lasts 7 years. Given that the mortgage has to be on a repayment basis. Likelihood is that the guarantee may well lapse naturally before the 7 years expires.
• Strict affordability criteria will be applied. Scheme isn't a licence for lenders to take excessive risk.
• There's no interest or penalty loading placed on the borrower for using the scheme.

If you put down a 20% deposit then you will pay a lower rate of interest. That's the commercial reality as the risk is reduced. Along with any potential loss to the lender.

stator

Assuming you don't own a house already then you can use the scheme for a 90-95% mortgage. Anything less than 90% and I don't see where you could get the mortgage. Most banks offer non HTB mortgages below 90% and the rates are better. Some banks off non HTB mortgages at 95%.
You just compare the mortgage rates in the normal way using their websites. All the HTB stuff is done automatically in the background, you don't need to worry about it or calculate anything.

In theory a bank could offer a HTB mortgage at 80% loan, but I don't know why they would and I've not seen any available. All the banks are willing to underwrite the entirity of the mortgage at 80% so why would they pay a fee to the government to underwrite part of it?