Over pay mortgage or HTB loan

jonnym8083

We are just about to start the process of sorting out our new home. We will have a rate fixed for 5 years of 1.84%
I will be saving around 18k a year putting it aside. I was looking to pay the equity loan back ASAP but would it make sense to overpay mortgage initially then add the equity loan to a remortgage in 5 years time?
I’m trying to work out the maths... if there’s not much in it either way then it doesn’t really matter but if one way works out much more cheaper then we can opt to do that...
Any help would be greatly received
Thanks

getmore4less

IF you can save £18kpy why do you using HTB?

If you can find savings that pay more than 1.84% put them there.

if not overpaying te mortgage will save more.

You then have to hope you can get it back when needed.

Don't forget that this an equity loan and goes up if your house goes up in value.

Have you worked at what point the house going up starts to lose you money over not using H2B?

jonnym8083

So this property is for me and my partner. However my partners credit isn’t great meaning mortgage rate would be high. Therefore we proceeded with the mortgage in my name...
If I don’t do help to buy as the house is £350k I wouldn’t get the LTV on my own... therefore if we do HTB I meet affordability with my salary however both of us will be paying the bills 50/50 as it is a joint property so I’ll still be able to save what I’m estimating...
It made sense to use HTB loan rather that taking a mortgage with a 3% increase.

kingstreet

You can't repay the HTB loan "on the drip." You can do it in one or two lump sum payments, 50%, then later another 50% or 100%.

Your options are to save or overpay the mortgage. The choice here will be based on net savings rate v mortgage rate.

foxy-stoat

What does your mortgage offer say about making overpayments, there will be ERC's to pay if you go over the limit so it may be worth saving £18,000 for the next 5 years and clearing the equity loan, either in full or half plus any increasing in property value.

getmore4less

With a £350k house 20% HTB 5% deposit.
if the ERC free is the common 10% £18k won't hit the limits till year 5

eg. £262k 30y loan 1.84% with £18k(£1500pm) overpayments will be around £2,500pm
balance at start of year
Y1 £262k
Y2 £236k
Y3 £210k
Y4 £184k
Y5 £157k reduced overpayment £1300pm total for Y5 £2,300pm £2,400 to save

End y5 £132k left.

1/2 the debt in 5 years.

jonnym8083

Yes aware can’t pay on the drip was either going to overpay mortgage so in 5 years can add equity loan on the remortgage or leave mortgage payments as it is... save the £18k each year then in three- four years should be able to just pay loan off

dimbo61

Unless you have other expensive debts I would hit the mortgage every month as your paying Interest on that debt.
If you get down to 50% LTV you will be able to get a good mortgage deal with the HTB balance and the existing mortgage.