Borrowing more: Help-to-Buy (Equity)

lordzargon

In February 2014 my wife & I bought a new house using the Help-to-Buy shared equity scheme, we took out a 75% mortgage, with 5% deposit and 20% Help-to-Buy.

By extension, February 2019 is when the "interest-free" period ends, and we'll start getting charged a monthly interest fee.

We have no intention of moving any time soon, we deliberately bought a house that was large enough to last having a family (we now have 2 kids).

I'm just getting to a period now where I'm in a position to pay off all outstanding debts (well, debt, there's only one loan), so I'm beginning to think about the next logical step, now I'm in a position to save everything after the usual utility bills, taxes and mortgage payments have gone out.

With all of that in mind, I have a few questions for anyone here who might have some knowledge or suggestions.

Firstly, our current plan is to now save hard until February 2019, where, assuming no significant increase in house prices from today, we'll be able to pay half the equity off at that point. Then, we can put the remaining 10% on the mortgage. Whilst we'll pay more per month, at least what we're paying at that point will be paying off capital.

However, to do so requires increasing our borrowing - and so to my first question (as I can't seem to find the answer anywhere):
If we borrow more on our mortgage, are our finances assessed in the same was as if we were remortgaging/moving home? If not, what is taken into consideration?

Its an important question, because with two kids, my wife will probably only be working part-time at that point, and with childcare being so prohibitively expensive, we might not actually be allowed to borrow the increased amount (even though, we could easily afford the monthly repayments with interest rates much higher than they currently are).

Secondly, our mortgage deal extends beyond the February 2019 point (as its fixed until August 2019). As a related, second question:
Can we borrow more with our current mortgage still running on a fixed rate deal? From what I can tell they're treated separately.

Finally, with interest rates so low, is it worth putting the equity amount on a long-term fixed-rate mortgage sooner than Feb 2019, even though we'd pay interest on it? The logic being that although the amount in interest free until 2019, if interest rates are significantly higher, it may actually cost more to put it on the mortgage at that point. We'll also have unburdened ourselves from worrying about it too much.

As I've said, I've endeavored to find these answers online, to no avail. I appreciate that last one is more financial advice than the simple "how does this work?" questions before it - I'm seeing a financial advisor in a few months, I'd just like to go in prepared with some better knowledge.

Thanks,

brit1234

Just save and save. Be best prepared for 2019. Personally I believe help to buy as an extremely dangerous scheme which will burn the tax payer and the buyer leaving only the builder happy.

The market mortgage review (MMR) after 2008 crash mostly banned these 5% mortgages due to the damage they caused. It was crazy for the government to reintroduce them putting tax payers money at risk.

beecher2

A lot can change between now and 2019 and no-one knows what banks will require by then. I'd imagine they'd want to check affordability before lending more money though. As brit says, best idea is to save all that you can - if your wife will be working part time in the future, you could put aside the difference just now in preparation.

lordzargon

Thanks for the reply.

I wouldn't consider it 'dangerous', if we were going to buy this house now, we'd still need to raise a similar amount of deposit as amount we have to have to pay back. The "interest fee" isn't going to be crippling.

If anything, I just want to get it out of the way. I'd like to get a point where its just utility bills, mortgage and council tax - and everything left over is disposable, and having the security that what I save is, actually, savings, and not earmarked for someone else's balance sheet.

My wife is already currently working part-time, but chances are she'll still be part-time in 2019, just because childcare where we live is significantly above the national average (in fact, she's on maternity leave at this very moment).

With all that taken into account - house prices could rise still by 2019 (our property has gone up by 26% in just 30 months, so far). Our circumstances wont have changed significantly from now, so I'm just educating on the best approach, with that all in mind. Especially interest rates being *so* low, and that wont last forever, either.

beecher2

lordzargon wrote: »

Thanks for the reply.

With all that taken into account - house prices could rise still by 2019 (our property has gone up by 26% in just 30 months, so far). .

The value of a new build has gone up 26% in 30 months? That sounds very unusual, what are you basing that on?

lordzargon

I'm basing it on:
What we paid for it in February 2015

What the house around the corner, identical to ours, recently sold for, and other houses on the development have sold for, in relation to what was also paid for those. Other properties locally have also increased by similar amounts.

brit1234

lordzargon wrote: »

I'm basing it on:
What we paid for it in February 2015

What the house around the corner, identical to ours, recently sold for, and other houses on the development have sold for, in relation to what was also paid for those. Other properties locally have also increased by similar amounts.

However prices are falling now. You have to sell to turn those paper profits into tangible reality. At the moment this so called equity can easily be wiped out and more on top as prices fall.

The market has changed, the housing bubble looks like it has burst.

If you want to add value to your property then do something physical to it to make it better rather than relying on speculation nonsense which can simply evaporate.

Thrugelmir

What rate of interest are you currently paying?

amnblog

Yes, the whole thing is underwritten for an increase.


It is unlikely you can buy the equity loan out and keep your current product.


It is unlikely you will benefit from changing your current product early and paying a fee to do so.


All these questions are best answered when you have your meetings with the financial adviser who can see the whole of the situation.