Help to Buy Equity Loan vs Bigger Deposit

bhjm

Hi,

apology if this was asked before but i couldn`t find anything in the search - maybe I`m just to stupid to search properly.

Could you help me with the math in what is cheaper in the mid to long term.

going with 5% deposit and take the 20% government help to buy Equity Loan?
I am aware that with a higher deposit - you could get a better deal in terms of interest rate.

Let`s speak about numbers.
property value: 200.000
5% deposit 10.000
20% Equity Loan: 40.000
mortgage: 150.000
LTV: 95% or 75%?
interest rate: ?
mortage term: i would like it for 5 year

OR

property value: 200.000
20% deposit 40.000
mortgage: 160.000
LTV: 80%
interest rate: ?
mortage term: i would like it for 5 year

So my questions -
what is the LTV if i use the equity Loan? (as example above)
what are the usual interest rates ?
mortage term: i would like it for 5 year

Thanks if anyone could help me.

poppy10_2

For the first example, LTV would be 75%.

Interest rates depend on who you go with
For an example Barclays offer help to buy equity loan mortgages for 2.17% on a five year fixed term, with a £999 fee, or 2.24% without a fee, both for 75% LTV

bhjm

poppy10 wrote: »

For the first example, LTV would be 75%.

Interest rates depend on who you go with
For an example Barclays offer help to buy equity loan mortgages for 2.17% on a five year fixed term, with a £999 fee, or 2.24% without a fee, both for 75% LTV

OH ! so i could theoretically use then the HTB Equity Loan to reduce my LTV, and using the saved deposit for a shorter mortgage term or overpayments.

poppy10_2

bhjm wrote: »

so i could theoretically use then the HTB Equity Loan to reduce my LTV

Yes, that is the purpose of the equity loan. Good luck.

getmore4less

The savings are 20%interest free the rest on a lower rate.

Losses are the change in value of the 20%( if it goes up)
+ the costs to pay off the loan.

You can quantify the price rise that will break even.

From that informed position you can make the call.

Some areas the loan is much lower risk as new build premium and stagnating prices mean it is less likely the savings get swallowed up.

Andymac1987

I don't know if this thread is still active, but in my experience some lenders don't want to deal with help to buy because there'll be a second charge on the property. This means you can't always get the good rates advertised.

I'm currently squirreling away to pay off my equity loan because when you do the numbers, the loan can become significantly bigger than what you borrowed given that it raises in line with the value of the property. Plus you then have the added interest after 5 years.

If you have the means of saving your own deposit, avoid help to buy is my advise.

LMS94

I was advised by my mortgage advisor to increase the term of the mortgage to 35 years and the extra money we save, put away towards the help to buy loan payment.

Your mortgage is a decreasing debt whereas the htb loan is potentially an increasing debt

Thrugelmir

Andymac1987 wrote: »

I don't know if this thread is still active, but in my experience some lenders don't want to deal with help to buy because there'll be a second charge on the property. This means you can't always get the good rates advertised.

There'll be administration to contend with. Lenders will have opted to be in or out of the scheme. There's no half way house.