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Savings to pay for HTB loan

Hey all,

my husband and I have just purchased a house using the Help to Buy scheme. To pay for the government loan, we are planning on putting some money away every month, and then by the time we reach the 5 years (interest free) we should have the money to pay for at least half of it (10%).

This is our situation:

Capital borrowed: £43,000
Money we want to put away monthly: £400

My problem is, I am trying to find where to put this money. The highest savings we can get from our bank is 0.85%. I know the fixed accounts yield the highest interest, but because we don't have any lump sum to put away now and we will need to able to pay monthly, I don't think that would work for us. The other thing is, it needs to be no/low risk as we need the exact amount to pay back at least 10% of the loan in 5 years.

To top it up, we are currently expecting our first child, expected to arrive in January. We will be opening a savings account for the baby as soon as they are born to put away some money for them. And when I was looking into it, I saw that the interest rate for children's accounts is much higher (about 3%). And I was wondering if it would be legal for us to put the money for the help to buy in that account, but then take it out to pay the HTB loan by the 5 years time.

I am really open to suggestions.

Thanks in advance

Replies

  • edited 27 July 2019 at 2:24PM
    ian1246ian1246 Forumite
    191 Posts
    Fourth Anniversary 100 Posts
    Forumite
    edited 27 July 2019 at 2:24PM
    Look at this page - https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/

    You can get 5% on up to £7500 via Nationwide Flex Accounts (1for each of you & a joint account) which lasts for 12months before the rate drops to 1%. You can get up to 3% on £4,500 (£1500 fort each of you in a TSB Current Account & then a TSB Joint Account).

    If you also open up a M&S Bank Account & First Direct - you ll be eligible for a linked 5% Regular Monthly Saver. HSBC also has a linked 5% to their HSBC account.

    Basically.... utilise regular savers to stash money away each month, then when they mature put them into a fixed saving account for XX years, which will mature in time for when you need the ££ to pay off the help to buy loan.

    Alternatively, you get 1.5% interest on an easy saver - https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

    For the minimum £££ pay in each month into the current accounts, just set up a standing order to bounce money between different bank accounts (from different banks) which will satisfy the "Pay £XXX every month" requirement most accounts have.

    As I understand it - money going into your childrens account becomes their money. It would be illegal to then use it to pay off your help to buy loan (even if it benefitted them indirectly).
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