HTB loan amount

NOVAMET21

Hi

Does the HTB loan amount stay the same or increases?

For eg, let’s say a 20% government loan of £400k house is £80k. I know the first 5 years is interest free but if we want to pay the loan back after 4 years of purchase, will the loan be still £80k to pay regardless of change in the value of the house in 4 years time?

Apparently most of the people who are in HTB scheme remortgage and try to pay the government loan off before 5 years.

fiisch

20% of the value of the house. So if the house goes up by £100k, the 20% equity stake increases by £20k.

A word of caution - the valuation is based on a surveyor, and their findings may or may not reflect the price you may actually get in the event of a sale. We have used HTB twice - first time we sold a flat for £230k, but surveyor valued flat at £240k (it wasn't worth that), so we ended up repaying £48k.

Yes, most people will inevitably remortgage to repay the 20% if not selling. If you go beyond the 5 years, you pay interest on the 20%, so best to try and get it cleared if possible.

NOVAMET21

Thanks fiisch.

Just so I'm clear about this as it is the most important factor using HTB scheme.

Lets say the value of the house is £400k and the equity loan is £80k.

Fast forward 5 years and the value of the house is now £500,000. So, will the equity loan be £100k?

Lets say we didn't bother paying a penny of the equity loan back and lets say fast forward 10 years from buying the house, the value of the house becomes £700k. Then the loan to pay would be £140k?

Thanks

Grezz24

Thats correct you owe a percentage of the equity rather than the amount.

See the loan as a 20% stake of the home. If the value increases 10 fold then the repayment would do so too as its still a 20% payment.

NOVAMET21

Thanks Grezz24.

How do people pay the equity loan off then? Obviously, it depends on variety of different factors such as the value of the house, change in value of the house, change in the household income and so on.

I was thinking for £400k house, if I get £80k as equity then I may be able to pay by the end of 4 years.

Initial Mortgage: £270k as £50k as deposit.

After 4 years, the outstanding mortgage would be about £243k.
Savings of £800 per month so in 4 years time, total savings would be £38,400.
The income would be likely to increase by about 10% in 4 years time, so more borrowing power.

So, the total new mortgage would be £284,600 after 4 years with £80k paid in full.
But then if the house value has gone up then it will be different story.

diggingdude

Maybe it will go down and cost you less

NOVAMET21

Yes, maybe it will go down.

The sales consultant told me that the market has changed in the last 6 months as the house value has dropped specially where I live and the developers are struggling to sell the properties as they are very expensive to buy.

As Brexit is coming nearer, the value of the house prices may stay the same or go down for few years. Also, I have noticed that lots of the houses prices has been reduced frequently which is unusual in the last 5 years.

letitbe90

agurung wrote: »

Thanks Grezz24.

How do people pay the equity loan off then? Obviously, it depends on variety of different factors such as the value of the house, change in value of the house, change in the household income and so on.

I was thinking for £400k house, if I get £80k as equity then I may be able to pay by the end of 4 years.

Initial Mortgage: £270k as £50k as deposit.

After 4 years, the outstanding mortgage would be about £243k.
Savings of £800 per month so in 4 years time, total savings would be £38,400.
The income would be likely to increase by about 10% in 4 years time, so more borrowing power.

So, the total new mortgage would be £284,600 after 4 years with £80k paid in full.
But then if the house value has gone up then it will be different story.

Just to advise (not for you specifically, but others who read this thread), any interest you pay on the loan does not contribute to paying off the loan. The loan never gets repayed by any mortgage or interest payments.

You can either pay it off in full as cash (in your case) or by selling the property, this is explained as follows:

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

If you want to pay it off in parts, you have to pay it off in minimum of 10% at a time. More information on this as follows:

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

Neither are a straight forward process either, as it requires independant surveyors and solicitors being involved - which unfortunately means fee's.