Help2Buy after year 5.

StuBobs

Some very early take up of the H2B scheme will see some users of the scheme soon approaching year 5 and the last year of interest free borrowing from the Government. Its early days for me, I'm just 16 months in but I'm keen to know if anybody has done any calculations on the exact point it most beneficial to pay back the Government. There are a few variables to consider :
a. loan term
b. amount of loan
c. increase in property value
d. current mortgage rate
e. new mortgage rate
f. RPI
and probably a few more I've yet to think of.

In an ideal world I'd like to remortgage for a higher amount, repay the H2B loan and still keep the LTV low because the value of my property has/d increased by at least 20%. Assuming my property increases in value by 20%+ I'd like to know the point at which I should pay off the H2B (with increasing year on year interest based upon RPI which is not fixed) whether it be by additional mortgage borrowing or cash funds from elsewhere.

I think Martin should have a calculator specifically for this, if it is indeed possible to do?

kingstreet

Too many variables and as far as I know, there are no calculators.

HTB Equity Loan started in April 2013, so another year before the first fee payments will start.

alex_163163

For my understanding, the length of fixed term mortgage initially taken out would be a factor too.
When remortgaging with the HTB still in place, there is a smaller pool of lenders who do this as I understand it.
So if you cannot get as favourable rate as you hoped with it still in place at the end of the fixed term, I'd look to pay it off by adding it to the mortgage then.

If a person can, I'd pay it off before the house value increases too much as you will then have to pay back 20% of the higher value.

ndf9876

My humble, unqualified advice, would be to overpay the daylights out of your mortgage, so that when you remortgage in Year 5, you can effectively "buy out" the government loan.

satchef1

It's difficult to forecast the future, but there's only two situations where I'd consider paying interest on the HTB loan:

The best mortgage rate you can get is significantly higher than the HTB interest rate + annual house price increase. It might then be cheaper to service the HTB interest and save toward repayment, rather than suffer higher interest rates by remortgaging.

You're near a better LTV band at the end of the five years and would benefit from waiting an extra few months. This could be especially true if you're looking at a longer term fix, say 5 years+.

In situations where you can't afford to remortgage the full value, it's best to sell up and use the equity to buy somewhere else.