Paying back Help to Buy Loan

Stuey2307

Hi all

I would like to know if any first time buyers that used the government's 'Help to Buy equity loan scheme'* successfully paid off their Help to Buy loan either by saving up, remortgaging, borrowing more on their mortgage or selling their first home?

*(equity loan meaning if the property value goes up, so does the amount we need to pay back)

My wife and I are currently in year 4 of our HTB loan, its interest free for the first 5 years rising to 1.75% in year six, 2.75% in year seven, 3.75% in year eight and so on…

The value of our property now is approximately £200k, we have £120k outstanding on our mortgage and owe 20% of the value of the property on our HTB loan (so approx. £40k). We would ideally like to remortgage the HTB loan in year 6 or 7 to prevent the interest rate from creeping up. Alternatively, we could save and pay it off in x2 10% chunks (so two payments of £20k), but it would be an awful lot easier to consolidate it with our main mortgage.

I've not yet come across anyone on the forums that have obtained an advance on their mortgage or re-mortgaged to pay off their HTB loan, I understand a few limited lenders offer this service. Our mortgage is with Nationwide, has anyone obtained a further advance from them to pay off HTB? It looks like, based on our income etc they may be able to lend us a portion of the HTB amount but not the whole amount.

We're probably going to be moving house (to make room for a second child) in the next 4 years. So perhaps it's better to just leave it and let the government take their 20% equity back when we sell? Any advice/ experience would be gratefully received!

Rambosmum

My sister has just sold her house which she bought with help to buy - she paid back to 10% at that point. She was going to remortgage and increase the mortgage to pay back the loan but decided to sell as she was pregnant with her second child.

Important when remortgaging is that you can pass the affordability test for the increased amount required. Does your remortgage date fit with the free loan end date? Would you consider paying back some of the loan in cash and remortgaging for the rest? What's the interest rate going to be on the loan compared to what you could get in an increased mortgage (ie is it worth remortaging)?

silvercar

IMHO, this is a time bomb.

There will be many others in your situation, not all will be able to remortgage or repay with savings. A lot will face rising interest rates that they may struggle to afford.

Be interesting to see what happens to house prices when this bomb explodes. Particularly in areas where a lot of people have used HTB around the same time eg developments of new build flats that all sold at the same time.

Stuey2307

Rambosmum wrote: »

My sister has just sold her house which she bought with help to buy - she paid back to 10% at that point. She was going to remortgage and increase the mortgage to pay back the loan but decided to sell as she was pregnant with her second child.

Important when remortgaging is that you can pass the affordability test for the increased amount required. Does your remortgage date fit with the free loan end date? Would you consider paying back some of the loan in cash and remortgaging for the rest? What's the interest rate going to be on the loan compared to what you could get in an increased mortgage (ie is it worth remortaging)?

Good points. I think our best bet at the moment would be to pay back 10% (i.e. save up), then sell and only take the hit of the remaining 10% equity - circa £20k.

You're right in that it won't be worth remortgaging at 3.5% if we're only paying 2.75% in year 7 - so it won't really be worth remortgaging until year 8 - in which case we'll be looking to move house anyway! I think I'll aim to get £20k in savings. Pay off 10% then consider our options!

TrickyDicky101

Stuey2307 wrote: »

Hi all

I would like to know if any first time buyers that used the government's 'Help to Buy equity loan scheme'* successfully paid off their Help to Buy loan either by saving up, remortgaging, borrowing more on their mortgage or selling their first home?

*(equity loan meaning if the property value goes up, so does the amount we need to pay back)

My wife and I are currently in year 4 of our HTB loan, its interest free for the first 5 years rising to 1.75% in year six, 2.75% in year seven, 3.75% in year eight and so on…

The value of our property now is approximately £200k, we have £120k outstanding on our mortgage and owe 20% of the value of the property on our HTB loan (so approx. £40k). We would ideally like to remortgage the HTB loan in year 6 or 7 to prevent the interest rate from creeping up. Alternatively, we could save and pay it off in x2 10% chunks (so two payments of £20k), but it would be an awful lot easier to consolidate it with our main mortgage.

I've not yet come across anyone on the forums that have obtained an advance on their mortgage or re-mortgaged to pay off their HTB loan, I understand a few limited lenders offer this service. Our mortgage is with Nationwide, has anyone obtained a further advance from them to pay off HTB? It looks like, based on our income etc they may be able to lend us a portion of the HTB amount but not the whole amount.

We're probably going to be moving house (to make room for a second child) in the next 4 years. So perhaps it's better to just leave it and let the government take their 20% equity back when we sell? Any advice/ experience would be gratefully received!

The increase are not as stark as you suggest - the following thread shows the link to the official document showing how Year 6+ charges are calculated:

https://forums.moneysavingexpert.com/discussion/5730275

kingstreet

TrickyDicky101 wrote: »

The increase are not as stark as you suggest - the following thread shows the link to the official document showing how Year 6+ charges are calculated:

https://forums.moneysavingexpert.com/discussion/5730275

Done already this morning, TD. Another thread on M&E;-

http://forums.moneysavingexpert.com/showpost.php?p=73756951&postcount=13

csgohan4

silvercar wrote: »

IMHO, this is a time bomb.

There will be many others in your situation, not all will be able to remortgage or repay with savings. A lot will face rising interest rates that they may struggle to afford.

Be interesting to see what happens to house prices when this bomb explodes. Particularly in areas where a lot of people have used HTB around the same time eg developments of new build flats that all sold at the same time.

Agreed, I think HTB is a scam imho, another scheme to prop up the government coffers at the buyer's expense. Same with Shared ownership although for different reasons.

GreenSnake

csgohan4 wrote: »

Agreed, I think HTB is a scam imho, another scheme to prop up the government coffers at the buyer's expense. Same with Shared ownership although for different reasons.

Agreed also.
Don't know a huge amount about it, but it appears a way for the government to push up house prices. More stamp duty for them, but probably not the main reason.

I think the main reason is political. Tories (and Labour) see first time buyers, especially from middle class families, as important i.e. potentially "swing" voters.
Landlords are not seen as "swing" voters. They won't vote Labour (probably), so the Tories will sacrifice them. And if it gets them a bit more tax at the same time, all the better.

Once you see things from the perspective of a politician looking for votes, as opposed to looking after the country, things start to make sense.

I actually know a few MPs, due to my previous employment role. Having chatted to a few in the bar, I was truly amazed how little they know.

One didn't actually know what the "Iron Curtain" was.
One didn't realise that fighter jets could break the sound barrier.
Another didn't know that commercial banks create money when they grant mortgages. Didn't understand money supply.
Another didn't know about previous mortgage rationing.
Gold standard - no. Obviously didn't know about that.

They basically bluff and do what others advise.
One thing they did all know about was what the other political party was doing. They were strangely tribal in some ways, didn't see any merit in other party's policies.