Help to Buy Equity Loans guide discussion

sclennett89

Myself and my partner are about to purchase a property for 180K in Yarm, TS15 9FL, Cleveland. We are putting 10% down with or without Help To Buy, we can afford the mortgage without HTB from day one at a push but in five years we would be much more comfortable financially to swallow up the equity loan with a remortgage, meaning we will benefit from a smaller mortgage for 5 years at a smaller interest rate.
We've been warned about a drastic rise in our payments in five years by taking out the HTB, but the way I see it in 5 years time we won't need more than the mortgage value we would be taking out at day 1 without HTB so we should certainly be in a position to consolidate both loans in a remortgage.
I understand if the value of the property goes up we will owe more, but if this is the case and we sell then great we've made a 80% profit, at least we will also have the security that if the property loses value the HTB loan will be smaller.
I'm just making sure i'm on the right tracks with all this and wondering if anyone can offer any advise or expand on what i've wrote?
Finally the housing company have offered us 5% so we will always have a bit of breathing space the fact that 9K equity in the house has been gifted to us.
Thanks
Sam

ihardingham

Hi all, this is a little complicated sorry in advance.

Firstly thanks for the guide but I think it has some holes:

We are in year 6 of our H2B having purchased our home in 2013, the house value has gone up through the roof increasing by over £100k

Logically it would make sense to repay Target through the normal repayment method as that is repaying the £44k we borrowed, and not the £70k that we would need to pay if we paid in full.

Is that right? It isnt covered in the guide, it talks about selling or repaying in full, are those the only options?

So if I make capital repayments and not interest only repayments am I repaying the initial borrowing amount or the 20% current value of the house?

Thanks for the advice already
Ian

kingstreet

Redemption of the whole loan, or staircasing (paying back half the loan which is the only other option) is always based on the current value.

There is no option to avoid paying based on the increased value and no option to make any other payments.

You can repay half the loan at one time, with the other half later; or the full loan at one time.

mikedaveross

Might want to read this about Help to Buy interest rate rises in year 5!

https://forums.moneysavingexpert.com/showthread.php?t=5985826

Not sure how to make an MSE employee aware?

martyn34

If I want to remorgage after 2 years to pay off the help to buy, do I just pay back the original sum or do they take it on the value of the house now, like they do if u was selling it. As the local estate has valued our house at 50k more then we paid.

kingstreet

martyn34 wrote: »

If I want to remorgage after 2 years to pay off the help to buy, do I just pay back the original sum or do they take it on the value of the house now, like they do if u was selling it. As the local estate has valued our house at 50k more then we paid.

Percentage of value at sale time, not original loan. It's based on the higher of value by a RICS surveyor and the agreed selling price.

See buyer's guide page 6;-

When you sell your Help to Buy home (unless you have chosen to repay your equity loan earlier), you must repay the Help to Buy assistance from a share of the sale proceeds. So, if Homes England assisted your purchase with a 20% contribution, your repayment will be 20% of the total market value when it is sold.

https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdf

GazSpence91

Hi, does paying off my mortgage early have any impact on my equity loan repayment schedule?

I have only seen that the equity loan must be paid within 25 years or on the sale of the property.

I'm looking to reduce my mortgage payments to zero and then 'staircase' my equity loan repayments.

Thanks

kingstreet

GazSpence91 wrote: »

Hi, does paying off my mortgage early have any impact on my equity loan repayment schedule?

I have only seen that the equity loan must be paid within 25 years or on the sale of the property.

I'm looking to reduce my mortgage payments to zero and then 'staircase' my equity loan repayments.

Thanks

Answered your thread elsewhere.

HTB loan must be repaid at same time, or before mortgage.

GazSpence91

Thank you. That's annoying. Would've loved to have been mortgage free and then chip away at the equity loan.

I think I'll pay off the majority of the mortgage and then 10% of the equity loan (based on my property price)

Cheers

kingstreet

Remember the equity loan can only be repaid in upto two chunks. 10% of property value each time, or 20% at once and there are costs to do this;-

https://www.myfirsthome.org.uk/