what to do in 5 years regarding help to buy/mortgage

the_shreksta

hi peeps

our 1st mortgage starts in september this year on a new build, we used the help to buy scheme as that was our only option at the time.

house was £240000

help to buy was 48000

halifax mortgage was £180000

deposit was £12000

we fixed for 5 years @ £700 per month which we can afford without issue.

so what do we do in the next 5 years to put us in the best financial position?
pay off some of the help to buy or over-pay our mortgage?

we have an extra disposable £200 per month between us. (maybe £300 depending on overtime)
thanks

csgohan4

do you intend on paying off the help to buy loan or lump into your mortgage on remortgaging, bit worrying you would only have 300 left over at best.


Have you factored in service charges and ground rent, ongoing maintenance?

alex_163163

I'd say overpay on the mortgage as much as you can each month, then look to remortgage at the 5 year point, and increase the mortgage amount to incorporate the htb loan (20% of value at the time of remortgage, not now).
Every time you staircase the htb loan it will cost you money in fees, solicitors fees etc, so would suggest to just do one staircasing overall.
Check out this website as it explains more about the htb loan once you have it. http://www.myfirsthome.org.uk/

getmore4less

Your biggest issue could be that the £48k will not be £48k in 5 years

Look at what you will owe in 5 years then project using various HPI and income increases to see if you can meet the affordability and LTV criteria to absorb the equity loan.

What rate and term did you get?

the_shreksta

Thanks for the replies guys.

Our 5 year fixed rate is @ 2.39% with halifax for 30 years with the intention of paying it off over 25 if possible.

Not sure what is meant by ground rent?

Yeah I'm also thinking of over paying over 5 years.

We have a comfortable 300 extra, (actually it's more like 700 but both myself and my mrs need new cars so will be looking at a loan to get both cars and pay it off before we need to remortgage) once cars are paid for we will have alot more spare cash.

getmore4less

Have you run the numbers?

If you want to pay off £180k+£48k in 25 years you need to be paying/saving a lot more than £700pm

The £180k will be £800pm and the £48k another £200 @ 2.39%
for a 25y target you should be aiming for £1k payment

What was the max you could borrow on your current income?
What is your projected income growth over 5 years to estimate new borrowing potential.

£180k @ 2.39% paying £700pm in 5 years you owe £158k

(with a bit of rounding)
HPI, HTB, you are looking to borrow, new LTV, payment for what is now 20y @ 2.39%
00% £48k £206k LTV 86% £1080
10% £53k £211k LTV 80% £1110
20% £58k £216k LTV 75% £1140
30% £62k £220k LTV 71% £1160


Have you done the calculation for putting down a bigger deposit(if you have the cash) and taking a higher LTV against the cost of prices rising over 5 years to see where the break even on the cost is.

If you pay at your 25y target rate of £1k the amount owing in 5y becomes £139k

HPI, HTB, you are looking to borrow, new LTV, payment for what is now 20y @ 2.39%
00% £48k £187k £980
etc.

amnblog

If your property value increases rapidly you will want to put your extra funds into buying the equity back as soon as possible.


If the value is going nowhere (or backwards) you may be better off reducing your mortgage and leaving the equity loan.

the_shreksta

getmore4less wrote: »

Have you run the numbers?

If you want to pay off £180k+£48k in 25 years you need to be paying/saving a lot more than £700pm

The £180k will be £800pm and the £48k another £200 @ 2.39%
for a 25y target you should be aiming for £1k payment

What was the max you could borrow on your current income?
What is your projected income growth over 5 years to estimate new borrowing potential.

£180k @ 2.39% paying £700pm in 5 years you owe £158k

(with a bit of rounding)
HPI, HTB, you are looking to borrow, new LTV, payment for what is now 20y @ 2.39%
00% £48k £206k LTV 86% £1080
10% £53k £211k LTV 80% £1110
20% £58k £216k LTV 75% £1140
30% £62k £220k LTV 71% £1160


Have you done the calculation for putting down a bigger deposit(if you have the cash) and taking a higher LTV against the cost of prices rising over 5 years to see where the break even on the cost is.

If you pay at your 25y target rate of £1k the amount owing in 5y becomes £139k

HPI, HTB, you are looking to borrow, new LTV, payment for what is now 20y @ 2.39%
00% £48k £187k £980
etc.

thanks for taking the time to give such a great reply

the max we could have borrowed was around £225000 i think.

not really done a projected income growth, standard yearly pay-rise does not really amount to much so not worth keeping a track of. my income really depends on how much overtime i want to do, over time is unlimited at my place so i guess i can earn what i want (i know it shouldnt be based on overtime but for 8 years i have done around 20 hours a week overtime without fail) even on basic i can afford my mortgage.

so perhaps at the moment im better saving all free money for 5 years and then wait to see what my house value is? if its not really gone up alot i could make a lump sum payment with the savings towards my mortgage.

getmore4less

Would have almost* certainly been worth taking on more debt to reduce the HTB portion even if the rates were a bit higher.



* could not find that 2.39% rate on Halifax, I see with £495 fee
75% 2.29%
80% 2.44%
85% 2.69%
90% 4.09%
95% 5.19%
http://www.halifax.co.uk/mortgages/moving-home/?pagetabs=3#help-to-buy


if that 2.39% was 75% what were the rates for 80%(£192k), 85%(£204k) and 90%(£216k) if available
I can run the 5 year numbers again to see what sort of prices rises would make you better of borrowing more and scaling down your car purchases.