Mortgage with help to buy Equity Loan

acerazor1

Hi all,

11 months ago, me and my partner bought our first house, valued at £248,000, with a deposit of £34,000 and a help to buy equity loan of £44,000 (18%) and a mortgage of £169,000, fixed for 5 years at 2.57%. We have been overpaying on our mortgage and now have 4 years 1 month left of our fix, with a mortgage of £157,000. After looking into help to buy remortgages, I'm starting to think we might be better off saving/investing the over-payment money and paying off the help to buy equity loan in 5 years using the cash and then remortgaging without the help to buy.

Would we be better off saving the cash and investing for the next 5 years then paying off the help to buy separate from the mortgage so we can unlock better mortgage rates when remortgaging?

Hopefully all of this makes sense.

Thanks for any help.

Thrugelmir

Unless you can better an interest rate of 2.57% on your savings. Then overpaying the mortgage is probably the better option. Investing is better viewed with a long time horizon i.e. 10 years.

kingstreet

Whichever route you go, you are going to end up in similar boats.

You'll have a smaller mortgage to add the equity loan to, or you'll have the savings to repay the equity loan and a bigger mortgage.

Probably little to separate them.

sal_III

Thrugelmir wrote: »

Unless you can better an interest rate of 2.57% on your savings. Then overpaying the mortgage is probably the better option. Investing is better viewed with a long time horizon i.e. 10 years.

That is true, if the house prices stay the same. The 0% interest for 5 years on the HTB equity loan is a bit misleading. If house prices keep rising the cost of repayment of the HTB loan might be a lot higher than the savings from mortgage over-payment.

IMHO planning for the interest only repayment of the HTB equity loan beyond years 7-8 is waste of money. At that point to me seems best to either sell and move or remortgage and repay the equity loan with that.

amnblog

What is misleading?

It is a loan and they charge you zero interest for 5 years.

The equity of 20% of the value can be more expensive to redeem if that value increases but that is not a function of interest.