Remortgage - LTV & Help To Buy Equit Loan

FinanciallyClueless

Hello,


I'm currently looking to re-mortgage. I have 20% equity and a 20% Help to Buy equity loan. Is my LTV therefore 60% or 80%? I'm looking to find out so that I can compare re-mortgage deals.


Thanks,


FinanciallyClueless

kingstreet

That depends on your intention towards the equity loan.

If you are leaving it in situ, it's a remortgage at 60% LTV with the limited lender options prepared to accept that the HTB loan will remain.

If you are remortgaging to repay the equity loan, it's an 80% LTV application with many more lenders available to you as there's no second charge muddying the waters.

Information from Target the post-sales HTB Agent you will need here;-

http://www.myfirsthome.org.uk/

FinanciallyClueless

Thanks for your reply kingstreet, our mortgage is currently £105,000 and we bought our house for £175,000 two years ago. We therefore have 3 years left of not being charged interest on the equity loan. In this situation, would you therefore suggest that we repay the equity loan to access the better mortgage rates?

kingstreet

That's not for me to opine on.

You have to work out the value to you of the remaining interest-free period v the house price growth potential in the next three years; plus the future trend for mortgage rates against the fee rates on the HTB loan post year five if you don't redeem now/then.

Too many variables and far, far too much like real, paid-for work, sorry.

getmore4less

FinanciallyClueless wrote: »

Thanks for your reply kingstreet, our mortgage is currently £105,000 and we bought our house for £175,000 two years ago. We therefore have 3 years left of not being charged interest on the equity loan. In this situation, would you therefore suggest that we repay the equity loan to access the better mortgage rates?

will it?

The limited lenders may have better rates on 60% LTV than all lenders on 80%.

The measure you want is the HPI of the 20% against the interest on the 20% and the difference in interest on the rest.


Remember it is 20% of the current price + costs extra you need to borrow.


Even if the numbers say buy out the loan you then have the affordability hurdle.

if you could not afford 100% of the house 2 years ago what's change so you can now?

FinanciallyClueless

Thanks for your advice getmore4less,
It would appear that the rates are generally lower on an 80% LTV mortgage than they are on a 60% LTV HTB mortgage as most mortgage providers don't offer HTB products which take account of the lower LTV ratio.
I think that forecasting the HPI over the next few years will by far be the most difficult part of this decision.
As for affordability, when we took out the mortgage 2 years ago we had a 75% mortgage with 20% HTB equity loan and 5% deposit. We've since paid off 15% of the house value so our LTV if the HTB was repaid would be 80% so only 5% higher than originally. Our household income has increased by about 2/3rds since we bought the house so I am hoping that affordability on the extra 5% shouldn't be an issue.

getmore4less

normal payments, over payments and increases in income will help with the buyout affordability and there is always a longer term to help if needed.

Working out the HPI needed is what you need to work with

What HPI have you had in the 2 years?

if I have it right.

paid £175k deposit £8750 HTB £35,000 mortgage £131,250

Mortgage now is £105k 60% LTV(based on 0% HPI in the 2 years)

looking at Nationwide as an example 5y fix, no fee

2.34 60% HTB
2.24 80%

Buying out your 20% costs 2.24% of 20% but you save 0.1% on 60%

The savings are for 3 years before interest kicks so you can spread the costs of the buyout across the 3 years


net cost is 1.94% of 20% + 1/3 share of the costs,
Will the share rise buy that much each year over the next 3

Even if just some of it it might be worth it to get the HTB out of the picture in case in 3 years there are affordability issues.

if there has been no HPI and there is none for the 3 years then the buyout is costing £65pm in extra interest.

NOTE: you are in the range where you need to check fee no fee options, eg on that NW 5y fix the fee(£999) option break even is around £110k so you may need to compare a no fee HTB with a fee based on 80% LTV

I would also crunch the number for a 2y and 3y fix if those options are available and if you pay off the HTB you open up other option like offsets

amnblog

If values are rising, securing the extra equity as soon as possible is generally a sound idea.

If they are static or dropping, it is generally better to stay with the equity loan.

Difference in mortgage rates will often be secondary in the mathematics.

dimbo61

The big elephant sitting in the property is the HTB loan.
You don't pay any interest for 5 years
What do you think the property will be worth at the end of the 5 years ?
Highly desirable property on New build estate with similar properties selling for more than you paid 2 years ago ?
Or quiet location where lots of new build properties like yours lying empty ?
Location ? Transport links and job opportunities ?
Would you be better off looking at an offset mortgage fixed for 2/3 years and paying the existing mortgage each month while saving the difference between a 60 percent mortgage and 80percent mortgage into the offset account.
I love offset mortgages and have had a Barclays and Yorkshire BS offset mortgage recently.