Help To Buy Equity Loan

Tynan301

Hi all

Just wanted to get some opinions on the Help to Buy scheme with regards to my particular situation. My thinking on the 20% equity loan is just to "ignore" 20% of the value of the property that you buy, it's a scheme that lets you afford a house you want when you don't have a gigantic deposit or a huge salary.
So my situation is this:
House value 295k
Our Deposit 40k (13.6%)
HTB Contribution 59k (20%)
Mortgage 196k (66.4% LTV)
Due to our particular situation we would be looking to sell and move away at the 5-6 year mark, therefore we will not incur the potentially large interest charges after the 6th year and the equity loan will be paid by the sale of the house. Im struggling to find information on whether it's advisable when using HTB to stay in a property for longer or whether 5-6 is fine?

dhokes

Tynan301 wrote: »

Hi all

Just wanted to get some opinions on the Help to Buy scheme with regards to my particular situation. My thinking on the 20% equity loan is just to "ignore" 20% of the value of the property that you buy, it's a scheme that lets you afford a house you want when you don't have a gigantic deposit or a huge salary.
So my situation is this:
House value 295k
Our Deposit 40k (13.6%)
HTB Contribution 59k (20%)
Mortgage 196k (66.4% LTV)
Due to our particular situation we would be looking to sell and move away at the 5-6 year mark, therefore we will not incur the potentially large interest charges after the 6th year and the equity loan will be paid by the sale of the house. Im struggling to find information on whether it's advisable when using HTB to stay in a property for longer or whether 5-6 is fine?

So long as you plan/think you can afford to move away after 5 years, you're exactly the person that the equity loan is aimed for. I'm just in the process of buying a house with HTB and I'm not necessarily planning to sell after 5 years but I'm definitely hoping to staircase my equity up to 100%.

moneytorques

I think the Benefits of it are best utilised to Buy out the H2B element after the Interest Free Period (if not before), obviously in an ideal world the Property Value will have increased in those 5 years and the LTV would be more accessible/favourable for Mortgaging out the Loan.(ie; <60%)

Our application has been approved, we also have a 5 year fixed term mortgage at 50% LTV however we are looking at doing some Property modifications IF we can get the Local H2B Agent to approve them and not include within the Future Valuation required when it comes to settling or making a staircasing payment.

If however the Property Value declined then it make sense that you sell as likely another property you would buy will too have decreased.
Your 40k deposit is still intact (less any associated house sale/purchase fees)

Dont forget that the H2B Mortgage Range is not as competitive as non H2B, theres a premium of >0.25% for such products IMHO so buying outside the H2B if you sold the newbuild in 5 yrs will be slightly cheaper in comparison.

dhokes

moneytorques wrote: »

I think the Benefits of it are best utilised to Buy out the H2B element after the Interest Free Period (if not before), obviously in an ideal world the Property Value will have increased in those 5 years and the LTV would be more accessible/favourable for Mortgaging out the Loan.(ie; <60%)

Our application has been approved, we also have a 5 year fixed term mortgage at 50% LTV however we are looking at doing some Property modifications IF we can get the Local H2B Agent to approve them and not include within the Future Valuation required when it comes to settling or making a staircasing payment.

If however the Property Value declined then it make sense that you sell as likely another property you would buy will too have decreased.
Your 40k deposit is still intact (less any associated house sale/purchase fees)

Dont forget that the H2B Mortgage Range is not as competitive as non H2B, theres a premium of >0.25% for such products IMHO so buying outside the H2B if you sold the newbuild in 5 yrs will be slightly cheaper in comparison.

Personally, I think I'd prefer it if house prices dropped in 5 years time so that I have to pay less to buy out the government.

alex_163163

I bought using help to buy equity loan, and sold just before 3 years in the property. The scheme really worked for me, however my purchase price was much lower.
I sold the property for £40k more than I bought, so yes I had to pay an extra £8k back, but it still left me with a healthy amount of equity.

moneytorques

alex_163163 wrote: »

I bought using help to buy equity loan, and sold just before 3 years in the property. The scheme really worked for me, however my purchase price was much lower.
I sold the property for £40k more than I bought, so yes I had to pay an extra £8k back, but it still left me with a healthy amount of equity.

Thats good going...
Can I ask why you Sold within 3 years?
Was the Process of Selling and additional Paperwork/Fees etc painful?

mrginge

dhokes wrote: »

Personally, I think I'd prefer it if house prices dropped in 5 years time so that I have to pay less to buy out the government.

Interesting theory.

You do realise that 80% of any overall gain or loss is yours don’t you?

dhokes

mrginge wrote: »

Interesting theory.

You do realise that 80% of any overall gain or loss is yours don’t you?

Yes. I don't know whether I'll stay there after 5 years or sell it so I think I'd rather take the loss in valuation and pay off the equity loan so that I own 100% sooner rather then start paying interest and possibly have a lower LTV mortgage. Whereas if I definitely have a plan to move out after 5 years then I wouldn't be too bothered about owning 100%.

mrginge

dhokes wrote: »

Yes. I don't know whether I'll stay there after 5 years or sell it so I think I'd rather take the loss in valuation and pay off the equity loan so that I own 100% sooner rather then start paying interest and possibly have a lower LTV mortgage. Whereas if I definitely have a plan to move out after 5 years then I wouldn't be too bothered about owning 100%.

Sorry I’m struggling to understand your logic.

If the valuation has dropped you have less to pay back, but regardless of whether you sell up or stay you have lost four times as much.

dhokes

mrginge wrote: »

Sorry I’m struggling to understand your logic.

If the valuation has dropped you have less to pay back, but regardless of whether you sell up or stay you have lost four times as much.

Why does it matter if my house drops in value if I have no intention to sell? Also, if I don't pay off the equity loan, my understanding is that I wouldn't have access to most of the mortgage products available on the market when it comes to remortgaging. Therefore, I'm thinking of paying off the equity loan and remortgaging. Plus then I also don't have the restrictions in place by HTB such as renting, doing any modifications to the house...

alex_163163

I sold as I decided to buy a bigger house together with my boyfriend (htb flat was bought solo).
Selling with the equity loan wasn’t too painful - https://www.myfirsthome.org is a useful website for people who have the loan and gives all the info on what you have to do to remortgage, sell, staircase etc.
You have to pay for an independent RICS valuation and pay an admin fee which will add a few hundred pounds into the selling costs - £380 for me. But the htb company were fairly quick to process my application and send the redemption figure to my solicitor. The only delay I ran into was really my fault and resulted in the initial valuation expiring but got the 3 month extension granted quickly.