HTB repayment options in 5 years time

Makkusu

Hi all,

We've recently moved into our first home about two months ago (Yipeee!), using the government's help to buy equity loan scheme. Borrowed about £44k from the government, £160k from the bank.

Since then my salary has gone up by around £17k a year (Yipeee!!!). Now prior to this payrise I budgeted £750 a month savings, so, £750 * 60 months = £45k

My question is, am I able increase my mortgage in 5 years time to use that money to pay back the HTB loan? Or does it have to be paid out of my own cash reserves so to speak?

I understand someone will think I should know this stuff before signing the agreement etc but it never really occurred to me at the time that I would like to borrow more. I could do with the £45k to put into longer term investments which would generate a decent return!

Any advice is welcome, or even thoughts on how others are looking to deal with their HTB loans?

Makkusu

Mummyto4kids

We are due to complete next week on the HTB scheme. We've budgeted to save over the amount of the equity loan because we know that house prices might change but we have also agree to overpay our mortgage as well with the intention of reducing the debt quicker so our borrowing options are better in 5 years time.

You can in theory remortgage in five years but it depends on what rates are available and what the equity is at the time. We will be using a broker again as we found ours to be invaluable in advising us.

The scheme isn't for everyone and obviously we don't know what house prices can do but we have been able to buy a lovely home that we simply couldn't have stretched to because it's hard to save while renting especially with four children!

Octaben

Just to clarify that you know it won't be 45k that you need to repay, it will be whatever percentage Equity Loan that you borrowed. So if the value of the house has increased then so will the amount you need to repay

Thrugelmir

Makkusu wrote: »

I could do with the £45k to put into longer term investments which would generate a decent return!

You need to factor in that investments could lose you money. One option is to overpay your mortgage by as much as you are able/can afford. This should increase the available equity and provide a platform on which to remortgage in 5 years time. The one certainty in life is that there is no certainty.

silvercar

I would give yourself some savings first, just to act as a buffer should you need it. What happens if you temporarily lose your job before the 5 years are up and can't remortgage for a higher amount?

I think this is going to be a particular problem in new build developments that have a lot of FTBs all using the HTB scheme. In 5 years time i predict a lot will come on the market and supply and demand will lead to a drop in their value.

Makkusu

Thanks for the input!

I've been investing a while now, well aware things can both increase and decrease in value - I work in financial industry.

From my calculations though it appears nonsensical to overpay mortgage just because our current rate is around 2.5% and I can earn at least double that elsewhere.

Assuming the bank loan me more in 5 years time would I be able to use that to buy out the governments equity portion. Leaving me with about 30% of equity in our household?

kingstreet

Makkusu wrote: »

Assuming the bank loan me more in 5 years time would I be able to use that to buy out the governments equity portion. Leaving me with about 30% of equity in our household?

Yes. A remortgage is an option, obviously subject to status, valuation and meeting lender criteria at the time.