Remortgage - was help to buy loan a mistake ?

free_flyer

I bought a new build nearly 5 years ago using a help to buy equity loan with a 5 year fixed rate mortgage, in 6 months time I will need to remortgage and either start paying interest on the help to buy loan or add it to the mortgage.

I wasn't expecting my monthly repayments to increase when it came to remortgaging, so it came as a shock when I calculated that the payments could increase by £200 a month if I add the help to buy loan to the mortgage. 

I've created a comprehensive spreadsheet for my existing mortgage which works everything out for the full term.  But I've little experience with mortgages so I'm seeking advice and hoping I've mis-understood or if theres a better option.

Below are the figures for the existing mortgage, help to buy and personal deposit...

• After 5 years I estimate that I will have paid £26k off the £189k mortgage, leaving a remaining balance of £163k.
• The original house price was £280k but its now estimated (on Zoopla) to be £331k, which is an increase of £51k (18.2%).
• This means the help to buy loan of £56k will also increase by 18.2% i.e. an increase of £10.2k so the loan now becomes £66.2k
• Therefore when remortgaging I will need to borrow £229.2k (£163k + £66.2k) which is a loan to value of 71%
• This is higher than the original mortgage, which was £189k with a loan to value of 68%.

The remortgage figures are below...



Using the L&C mortgage search tool for a £229k mortgage (can't remember the term length but it was 20 something years) it looks like the repayments will be just over £1,000 a month.  That's £200 a month than I've been paying for the last 5 years...


If I don't add the help to buy loan to the mortgage, then I estimate that the interest only repayments on the loan (which kicks in after 5 years) will be £100 a month.
So, is my understanding and are my figures correct ?
And if so, is there a better option I can take ?
I live alone and have a 14 year old daughter to financially support (child maintenance) so I was hoping things would get easier, not harder 

csgohan4

you either pay off the HTb through the equity you have or start paying interest on it, no other way round it

DId you not realise this would be the case when you researched the HTB scheme?

depending on the interest rate your paying on remortgage, paying more is not impossible as your putting more debt into your mortgage via the HTB loan

Thrugelmir

Rather than rely on Zoopla. Obtain a formal valuation. 

Is it possible to extend the mortgage term to make the repayments more affordable? 

You've made a potentially decent gain in property value over the past 5 years. Is downsizing now an option? The child maintenance you receive is only going to last so much longer. 

free_flyer

Thrugelmir said:

Rather than rely on Zoopla. Obtain a formal valuation. 

Is it possible to extend the mortgage term to make the repayments more affordable? 

You've made a potentially decent gain in property value over the past 5 years. Is downsizing now an option? The child maintenance you receive is only going to last so much longer. 

Whats involved in getting a formal valuation ?  Is there a cost to doing this ?
I was 40 years old when I took out the existing 27 year mortgage, so this would have meant paying the mortgage until the age of 67. 
I was hoping that after 5 years I would only have 22 years left on the mortgage, but now it looks like it will need to be another 27 years, taking me to the age of 72 to pay the mortgage off.  In which case I probably wouldn't be eligible for a mortgage for that length of time at my age ?
The house is only a small 2 bed so it would be difficult to downsize, I need the second room for when my daughter stays with me (alternate weekends).
As far as I know, maintenance will last for another 7 years as she is only 14 and I'm told that I have to pay until she's 21 ?

free_flyer

csgohan4 said:

you either pay off the HTb through the equity you have or start paying interest on it, no other way round it
DId you not realise this would be the case when you researched the HTB scheme?
depending on the interest rate your paying on remortgage, paying more is not impossible as your putting more debt into your mortgage via the HTB loan

At the time I was paying £875 a month rent for a small 2 bed coach house and the rent was about to increase yet again.  I was under pressure as the opportunity came up to get on the property ladder and I had already spent 10 years renting and was sick of throwing all that money away.  I did research and understand the HTB scheme and at the time I understood that after 5 years I would have to start paying interest on the loan, it wasn't until further down the line that I realised the loan could be added to the mortgage after 5 years which sounded like a no brainer until I ran through the calculations.  I wasn't clear on how much I would have paid off the mortgage after 5 years, I calculated it my spreadsheet and it seems to be following my calculations.  I obviously didn't know how much the house price would increase, but I knew it had to be better than renting and didn't need to worry about it for another 5 years.  
Would it be worth considering paying only part of the HTB loan off and paying interest only on the remainder ?  If I paid 50% of the loan (£33k) then the remortgage amount would be £196k and I assume the interest for the remaining loan (£33k) would be around £50 a month ?

csgohan4

HTB % increases with your equity, so inevitably you will pay back more than you got in return. Personally I feel HTB is a scam in addition to the inflated new builds the HTB is for. 

Either way is a lose situation for the buyer and sadly you like many other people have fallen into the trap to buy at any cost and thinking buying is better than paying someone else's mortgage without ensuring it is the right thing to do at the time. 

blue_max_3

If you have six months to sort this out, why not wait a few months and get a RICS valuation done. There will be a cost for this. Hopefully it will have reduced a little in value from the Zoopla valuation (which may be optimistic in order to sell). Would probably be money well spent.