Remortgage to pay HTB Equity Loan

Sparx

Hi guys, so I'm thinking ahead (mid-2019) when our HTB equity loan 5 year interest free term finishes. I hope and intend on remortgaging the funds to pay off the HTB loan, affordability and the LTV will be fine...

My only question is will this have to be done as a '2nd mortgage'? i.e. I pay ~£125pm extra alongside my mortgage payment, to pay this extra borrowing off? Or would/could I remortgage, so that it adds to my original mortgage balance, so my mortgage payment just goes up ~£40pm? It seems like a bad idea if it has to be the former method.

The mortgage is with Nationwide if it matters.

Thanks

Thrugelmir

Remortgage is when you switch lenders. If you remain with the NW you will need to apply for the total amount of borrowing required. However you could have a separate product just for the additional amount of borrowing required to refinance the equity loan element. In effect porting the existing product you have.

In refinancing the HTB equity loan you will of course need to pay for the uplift in the value of the property, if there has been any.

Sparx

Thanks Thrugelmir - the separate product for the additional borrowing, seems like a bad idea to me (unless I'm missing something)? It would mean I pay a separate £125pm extra, whereas if I could increase my 1st mortgage lend, my payments would only go up ~£40pm thereabout.

So if I stay with NW would I be forced to take a 2nd mortgage to pay the equity loan off? Or would I have to move lenders and borrow more at the same time, if I want to my preferred method of one payment a month? (which costs less a month) Or have I got this all wrong and I can stay put with Nationwide and just increase my 1st mortgage lend to pay the HTB loan off?

It just seems daft if I had to take a 2nd mortgage, as it would cost me a lot more a month, plus a fortune more in compound interest - am I looking at this in the right way?

Thrugelmir

You'll only ever have one mortgage. As that's the legal charge placed on the property to secure the debt. However there's no restriction on the number of sub accounts, i.e. separate loans that you can have. These sub accounts can be for different products running for different terms. Providing you meet the lenders criteria at the time of application. Lenders criteria being itself governed by regulatory constraints.

It would mean I pay a separate £125pm extra, whereas if I could increase my 1st mortgage lend, my payments would only go up ~£40pm thereabout.

I've no idea what mortgage product you currently have. However I wouldn't base a decision on the future as of today. Anything could change in the intervening period before 2019.

So if I stay with NW would I be forced to take a 2nd mortgage to pay the equity loan off? Or would I have to move lenders and borrow more at the same time, if I want to my preferred method of one payment a month? (which costs less a month) Or have I got this all wrong and I can stay put with Nationwide and just increase my 1st mortgage lend to pay the HTB loan off?

You'll have a variety of options at the time. Again pure speculation to suggest what might be best now. Whether to remain with the NW or remortgage elsewhere. Your existing mortgage product may determine your initial options. Though I'm guessing it ends at the end of the initial 5 year period. The only certainty about the future is that it is uncertain.

Personally I'd focus on what you can control, i.e. the total amount you need to borrow. Either overpay your existing mortgage. Or build savings to help fund the transition.

enthusiasticsaver

I am not quite sure what you mean by second mortgage. Your property i# already mortgaged to Nationwide so additional borrowing by way of secured loan would be tagged on to your existing mortgage. How much you pay would depend on amount, interest rate and term. It would not necessarily have to be the same rate or term as your original mortgage.

Sparx

I think what I have meant is the 'sub accounts' with the same mortgage lender.

I think I have misunderstood what happens when I borrow more but was to stay with Nationwide. After thinking back I recall my dad had 3 'sub accounts' with Nationwide when he has borrowed more in the past, but still had 1 single monthly payment.

Quite sure I have misinterpreted how the additional borrowing would re-calculate my payments. I think it would work as I had hoped! (hopefully)

Currently on a 75% LTV mortgage with NW - the extra borrowing would bring me to about 81% LTV at the time. Assuming house prices don't rocket up or down much in the next 15 months.

dimbo61

So in about 18 months you have decisions to make.
Check the HTB website and find out what interest rate you will start to pay in 18 months on the help to buy loan.
This is I think ! Interest only so your not repaying the loan ( please check this )
You still have your mortgage and you can then see what your home is worth ( has it increased in value or gone down ) New builds !!!
There are a limited number of lenders who deal with HTB loans and offer mortgages.
While if you can take out a mortgage to cover the whole amount owed IE outstanding mortgage and HTB loan with affordablity checks

Sparx

Yes already done our homework before we bought the house, we know how the HTB works itself. After the initial 5 years, I'll pay just interest @ 1.75% of the equity loan, after the 1st year it rises by any increase in RPI plus 1% - hence my desire to pay it off ASAP and just remortgage it.

Plus to also avoid any further increase in house prices, meaning I'd have to pay the Government back more money. Our house value has already gone up approx 4-5% in the last 4 years nearly.

My LTV would only be ~80% with the extra borrowing. My current lender Nationwide were of course happy and they still offer competitive rates, so I'd be inclined to stay but will shop around closer to the time.

I wouldn't of thought HTB is an issue when I remortgage / borrow more - as the extra is to pay off the HTB and remove their interest in my home. So I don't need any specialist mortgage still from anyone?

Affordability shouldn't be an issue, we can borrow double what the mortgage lend is. So we are only borrowing just over half what NW's max lend to us.