First Time Buyer/H2B Advice

HayleyB26

We are looking at buying a new build property of around £400,000, we have the 5% deposit, so will be using the H2B scheme.

In regards to the equity loan, what is the best way of repaying this?

We have a flat (worth £80,000) that is being left to my partner in a will (within 5-10 years). (Understanding that this cannot only be solely relied on, as it hasn't happened yet). Once the flat does become our property, are we best to sell it and to put it into the house and remove the government loan? Or are we best to find an alternative means of repaying the equity loan, and rent the flat out, which could provide an extra stable income?

Ideally, we don't want to have to sell the flat, as this can accrue a stable income. What are people's thoughts on this?

Additionally, my partner will receive a large amount of money from shares within his company in around 4 and a half years, so this could also be considered a possibility.

Another idea we have been suggested is to overpay the monthly mortgage payments, in hope to remortgage to repay the equity loan. Any thoughts on this?


Any other advice or suggestions would be greatly appreciated.

sal_III

You don't have to repay the loan in 5 years, you will have to pay some interests after the 5th year, but it's not the end of the world. Relying on inheritance or shares options to mature is not a bad plan.

Personally instead of overpaying my 1.59% interest mortgage I'm putting the extra funds into 1.5-2% interest savings accounts until I accumulate 10% for a equity loan staircasing. IMHO overpaying the mortgage doesn't make much sense at the current low rates.

If the property price falls - you are better off repaying the equity loan as you will repay less than you borrowed.

If the property price rises and you plan to keep the property longer than 5-10 years - you are better off repaying the equity loan, before the repayment amount goes out of hand. Most likely option would be via remortgage.

If the property price rises and you plan to sell the property in the next 5-10 years - you are likely better off overpaying the mortgage, paying some interests on the loan and let the sale to take care of the repayment.

HayleyB26

Perfect that's what we were thinking to be honest! You've given me more to think about and it does make sense to place money in a savings in order to staircase - this is a very good plan!

At the moment we have 10% deposit towards the mortgage, but we are able to take the mortgage out with a 5% deposit. Are we best to keep the 5% in a savings so it generates interest in order to put this onto the equity loan or to put it towards the deposit which will ultimately lower monthly repayments?

sal_III

Just take less than the maximum % equity loan if you have the money now. Squirrelling the money now if you have them in the first place is a gamble, if the property price rises you stand to lose much more than the interests on the deposit.

HayleyB26

sal_III wrote: »

Just take less than the maximum % equity loan if you have the money now. Squirrelling the money now if you have them in the first place is a gamble, if the property price rises you stand to lose much more than the interests on the deposit.

Oc course, makes sense. Thank you so much!