Best ways to pay off Help 2 Buy equity loans?

Stuey2307

Hi, this thread seemed like the most appropriate place to start… I would like to know if anyone has successfully paid off their Help to Buy loan either by saving up, remortgaging, borrowing more on their mortgage or selling their first home?

My wife and I are currently in year 4 of our HTB loan, as explained above, its interest free for the first 5 years rising to 1.75% in year six, 2.75% in year seven, 3.75% in year eight and so on…

The value of our property now is approximately £200k, we have £120k outstanding on our mortgage and owe 20% of the value of the property on our HTB loan (so approx. £40k). We would ideally like to remortgage the HTB loan in year 6 or 7 to prevent the interest rate from creeping up. Alternatively, we could save and pay it off in x2 10% chunks (so two payments of £20k), but it would be an awful lot easier to consolidate it with our main mortgage.

I've not yet come across anyone on the forums that have obtained an advance on their mortgage or remortgaged to pay off their HTB loan, I understand a few limited lenders offer this service. Our mortgage is with nationwide, has anyone obtained a further advance from them to pay off HTB?

Any advice/ experience would be gratefully received!

kingstreet

Stuey2307 wrote: »

1.75% in year six, 2.75% in year seven, 3.75% in year eight and so on…

That isn't the case.

If you assume inflation runs at 5% per annum, it's 1.75% in year six, 1.86% in year seven, 1.97% in year eight and so on.

You may wish to look at your personal worked example from the HTB Agent when your ATP was issued, or the HTB Buyer's Guide, page 18;-

https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-oct-16-V1016.pdf

sliyk

I am very much intrigued by all the points of view where.
We recently bought a 370k house with 5 percent deposit and 20 percent HTB. The HTB loan is approx 75k. A saving of approx 1200 quid a month and we have enough at the end of the 5 year to pay off most if not all of it.
On the other hand people have written here that overpay on the mortgage and then apply to remortgage to have the HTB paid off in full at the end of 5 years?
I am unsure as to which one would be better for us.

kingstreet

There is no right or wrong answer.

No-one knows what is going to happen to property prices so there is no way of knowing the amount needed to redeem the loan past the end of year five.

If you build up a savings buffer, or overpay your mortgage you are creating the ability to deal with the loan in some way at some point in the future.

Doing nothing shouldn't be the answer. Thinking of an exit route is the right thing to do.

sliyk

That's what we are doing. Putting a substantial amount away every month. Just wanted to know what would be better, saving it to pay off HTB or to overpay on the mortgage. Definitely NOT not doing anything.

kingstreet

The last bit was aimed at future readers, not you.

Hence, no quote.

dimbo61

So what is the rate you are getting on your savings ?
What is the rate you are paying on your mortgage ?
Now we have just had a 5% regular saver with Nationwide GREAT
However you can only save £500 (each) for 12 months and the money earns 2.5% over the 12 months so is your mortgage rate more ?
After 12 months you can only invest £250 a month ( each ).
To all the people on HTB please overpay the mortgage every month.
Other people will talk about Stocks and shares ISA,s and other investment but that maybe a big gamble with your HOME

amnblog

Is the OP saying they bought a new home in July 2016 and in January 2017 they 'we have some plans to improve the property, which would hopefully put the value up'?

How do you 'improve' a property 'straight out of the box', and if you can, can you do it with without affecting the guarantee.

If you can, why would you do that when you only owe 80% of it.

Someone is bonkers here - perhaps it's me.

sliyk

The rate we got for the mortgage was 1.49 percent fixed for 2.5 years, resulting in repayments of £851 per month. Our savings are not accumulating interest (personal reason not to do so).

getmore4less

sliyk wrote: »

I am very much intrigued by all the points of view where.
We recently bought a 370k house with 5 percent deposit and 20 percent HTB. The HTB loan is approx 75k. A saving of approx 1200 quid a month and we have enough at the end of the 5 year to pay off most if not all of it.
On the other hand people have written here that overpay on the mortgage and then apply to remortgage to have the HTB paid off in full at the end of 5 years?
I am unsure as to which one would be better for us.

It might not be £75k then the clue is equity loan.


The real saving is interest free on £75k and a lower rate on the rest.

From that you can work out how much house prices need to go up in the 5years to be worse of with the HTB over just buying all of it.