equity loan help to buy pay off

Phil_Caddy

mrmagooooooo wrote: »

I have done pretty much exactly the same as you op

Bought a house for 200k had a 10k deposit and used help to buy and have the same plan, although the HTB will be partially paid with Shares and bonuses so no saving specifically for it. The rest will then be remortgaged.

I did this around 2 years ago. Granted what people are saying on here is correct. The bubble may burst at any moment. You may also get run over by a bus. You take your own chances so its up to you but I like yourself saw nothing wrong with the plan.

Hope that helps

thank you for the reply. i've tried todo as much research as i can on this and you have helped the most. it's given me some hope with my plan and i'm going to go ahead with it. so have you paid the equity loan off now after you remortgaged?

ViolaLass

You only save money if the remortgaged section is on a lower interest rate than what you would have had to pay the government e.g. if the interest in year 6 (to the government) is 1.75%, then you need a mortgage that costs less than that.

mrmagooooooo

Phil_Caddy wrote: »

thank you for the reply. i've tried todo as much research as i can on this and you have helped the most. it's given me some hope with my plan and i'm going to go ahead with it. so have you paid the equity loan off now after you remortgaged?

The Equity loan is still in place at the moment, we will look at remortgaging once the 5 years is up.. but as per the post above.. only if it is cheaper to do this. If the Interest rate from the help to buy is cheaper than the remortgage then we will continue with it.
:beer:

Swasterix

ViolaLass wrote: »

You only save money if the remortgaged section is on a lower interest rate than what you would have had to pay the government e.g. if the interest in year 6 (to the government) is 1.75%, then you need a mortgage that costs less than that.

The above isn't strictly true. OP, I'm in a similar situation as you, and have done a fair bit of number crunching so here is my take.

The amount you pay back is a percentage of the propertys current market value, and not the original amount you have borrowed. If the value of your property does increase in the first 5 years, then the savings you make on the interest rate may be wiped out due to the increased value of the governments 20% stakes.

Basically, there is no right or wrong answer as nobody can say what is going to happen to the value of your property over the next 5 years. My take would be that if you are intent on going for the equity loan, save the money as planned, then get your house valued and see a good financial advisor at the point that you are in a position to repay. You will then be able to make a clear decision as to which is the most financially beneficial option to you.

Alternatively rather than saving money, you could instead make overpayments to your mortgage in the first 5 years to increase your equity stake. This could be beneficial as the % interest will be higher on your mortgage than you will get from your savings, meaning you will save money in the long run.

Like I say, see a financial advisor

Phil_Caddy

everything makes sense what you've all said and i take it on board. i think making overpayments for the mortgage could be a good idea. then if the remortgage after 5 years isn't a good enough % then i'll pay the interest to the government for year 6. this way i'll have more equity as well as more saving time to see what deal i can get after year 6. then hopefully get a better deal with a remortgage and pay the government off in full. thank you all for you're advice

HarryChana

Hi Phil,


I'm currently going through the same thing. My remortgage completes tomorrow, and with the additional borrowing I will repay the government loan. For me, it made sense to do this as soon as possible because I think house prices (in the long run anyway) will continue to increase in the area I live in. Hence it makes sense for me to redeem at as low a value as possible and keep all of the capital gain if/when I decide to sell in a few years time.


However, everyone's cicrumstances are different. Ultimately, my deicision was based on whether I could afford the increased mortgage payments. After checking the my revised monthly payment versus my income I'm confident I can pay (and still have plenty of money left for food/living expenses etc.) in any circumstance. If I wasn't sure, I wouldn't have done this.


As a few people have mentioned already, there isn't a right or wrong answer necessarily as nobody can predict the future. You can only be comfortable with the decision you make at the time and make sure you won't have sleepless nights worrying about affordability.


Good luck!


Harry

chrisjwright

This is exactly what me and my partner have done. We borrowed the 20% and are currently putting £200 a month into shares in her work (we at worst would only get back in what we have put in). At the moment though the shares are doing well (fingers crossed). This will be a good chunk towards paying back. We are also over paying on the mortgage every month to help towards bringing the equity down. We where advised that this was the best solution for us by a family friend who is a mortgage broker. I'd go see a mortgage broker or financial adviser to help.

Jon_B_2

You are in essence doing the same as what we are doing. Except that rather than putting the money into savings which at best are around 0.75% interest, we are overpaying our mortgage which is at 2.84%.

Our house in the last two years has gone up by £50k though, which means the amount we now owe the government is £10,000 more.