Help to Buy - Weighing up my options

dh058977

Good Afternoon All,


I have been lurking on the 'House Buying, Renting & Selling' forum for a number of weeks as we have recently purchased our first home using Help to Buy.


I know we are a very long way off needing to re mortgage or start paying off the equity loan however, I would love to get our options clear in my own mind.


As far as I can tell, at the end of the 5 year interest free period (Or before if we come into money) we will have the following options . . .
1. Pay it all off (We wouldn't be able to do this!) or staircase 10% and pay the fees associated with getting the house valuation etc. We would then have a further 10% to do later on.
2. Providing suitable equity in the property, pay the HtoB fee to re mortgage inc the value of the equity loan and pay it off.


Is there anything else I am missing? I have been doing a lot of reading and have come to realise that re mortgaging may be more difficult than if we had a regular mortgage and the rates may not be as good!


Thanks in advance.

alex_163163

Have you looked at this website...... http://www.myfirsthome.org.uk

Quite useful info on how you can pay off the htb loan, fees involved and what documents/ info you will need.

ashmate19

I'll be in a very similar position myself soon so I'm interested to see what replies and advice you get regarding this as well. What mortgage are you currently on?

dh058977

alex_163163 wrote: »

Have you looked at this website......

Quite useful info on how you can pay off the htb loan, fees involved and what documents/ info you will need.

Yes thank you, lots of good information I'm just always worried I have missed something!!

We have a plan in place to over pay on our mortgage so hopefully once our fixed rate is up we will have enough equity in the property to remortgage inc the full equity loan.

dh058977

ashmate19 wrote: »

I'll be in a very similar position myself soon so I'm interested to see what replies and advice you get regarding this as well. What mortgage are you currently on?

We both bank with Nationwide but we have a 2 year fixed rate with another lender but we hope to remortgage with Nationwide, either after the 2 years or at most in 5.

Good luck with yours!

dhokes

I'm planning to purchase a home with the HTB equity loan soon and having read around the subject, I was under the impression that it's best to pay off the equity loan as soon as possible rather than over paying the mortgage.

dh058977

dhokes wrote: »

I'm planning to purchase a home with the HTB equity loan soon and having read around the subject, I was under the impression that it's best to pay off the equity loan as soon as possible rather than over paying the mortgage.

Its obviously best to pay it off in the first 5 years while it is interest free but if you cannot clear it in the first 5 years it might be more beneficial to use any spare cash to overpay on the mortgage as that's what you are paying interest on.

dhokes

dh058977 wrote: »

Its obviously best to pay it off in the first 5 years while it is interest free but if you cannot clear it in the first 5 years it might be more beneficial to use any spare cash to overpay on the mortgage as that's what you are paying interest on.

True but if you can't pay off your mortgage such that when it comes to re-mortgaging you'll be at a lower LTV% banding to receive a better interest rate, surely you would be better off saving that money to pay off the equity loan? Assuming that by budgeting, you can pay off the equity loan sooner rather than later.

SuboJvR

dhokes wrote: »

True but if you can't pay off your mortgage such that when it comes to re-mortgaging you'll be at a lower LTV% banding to receive a better interest rate, surely you would be better off saving that money to pay off the equity loan? Assuming that by budgeting, you can pay off the equity loan sooner rather than later.

It is complicated and will depend from situation to situation.

For example, mortgage interest versus help to buy interest from year 5+.
Has the house value gone up, or down?
If up - yes, getting rid of the HtB ASAP will be preferable. If down - potentially better to pay off the more expensive debt first (i.e. mortgage with interest).

And of course, it's quite likely that someone won't be able to pay off their HTB loan within five years, because they needed the loan to begin with. This depends on how much was borrowed relative to incoming money, of course.

I know we won't be able to pay it off within 5 years. We may be able to pay off half of it.

I need to decide whether we seek to do just that, or overpay the mortgage to that same amount. Or simply save the money for maybe 2-3 years, and re-evaluate our circumstances then (will probably do this; can still put it onto the mortgage if we want, but at least the money is still within reach if required).

I did work out that if we overpaid the mortgage then by year 7/8 we should be able to remortgage, with the same affordability calcs, to swallow up the HtB loan at a similar LTV.

Lu_Lu

I am not sure if this will help, but sharing our experience in case it does.

We bought our house in 2015 using HTB and borrowed 20% of the house value. Our intention was to either staircase (pay half off) or to wait for the 5 years to be up and then pay it off.

We worked out that, after 5 years we would be able to add extra to the mortgage and then use savings to top up the rest. To be fair we did start out with a little pot of money left from selling our old house but also were saving around £300 per month for this.

Fast forward to May when we met with our broker about remortgaging and his advice was not to staircase as there are so many fees to pay it can be quite an expensive business doing that twice. He advised to get another mortgage for as much as we can and then use some of our savings to top up the HTB loan and pay it off now. I never thought we would be in a position to get rid of it after 2 years so very happy.

We have our mortgage offer and the house has been valued at a little less than we paid so we've saved a few hundred pounds there but now don't have the worry of it being worth so much more in a few years and owing them more!

We've got almost all the paperwork in place, just waiting for a completion date and then we'll be done. We got a much better mortgage rate so our payments are going up £100 a month but now we don't have to keep saving the £300 per month and we're going to end up with a good chunk of our savings left.

I think you need a plan for paying it off but look at doing this as soon as you can and use a specialist broker who can get you access to the good deals, advise on affordability for larger mortgages and can do all the work for you.

Good Luck!

dhokes

Lu_Lu wrote: »

I am not sure if this will help, but sharing our experience in case it does.

We bought our house in 2015 using HTB and borrowed 20% of the house value. Our intention was to either staircase (pay half off) or to wait for the 5 years to be up and then pay it off.

We worked out that, after 5 years we would be able to add extra to the mortgage and then use savings to top up the rest. To be fair we did start out with a little pot of money left from selling our old house but also were saving around £300 per month for this.

Fast forward to May when we met with our broker about remortgaging and his advice was not to staircase as there are so many fees to pay it can be quite an expensive business doing that twice. He advised to get another mortgage for as much as we can and then use some of our savings to top up the HTB loan and pay it off now. I never thought we would be in a position to get rid of it after 2 years so very happy.

We have our mortgage offer and the house has been valued at a little less than we paid so we've saved a few hundred pounds there but now don't have the worry of it being worth so much more in a few years and owing them more!

We've got almost all the paperwork in place, just waiting for a completion date and then we'll be done. We got a much better mortgage rate so our payments are going up £100 a month but now we don't have to keep saving the £300 per month and we're going to end up with a good chunk of our savings left.

I think you need a plan for paying it off but look at doing this as soon as you can and use a specialist broker who can get you access to the good deals, advise on affordability for larger mortgages and can do all the work for you.

Good Luck!

1. I don't suppose you've got an approx. breakdown of the fees you've paid to pay off the equity loan?

2. Did you use a national mortgage broker? If so, I don't suppose you can share the name.