Remortgaging with Help To Buy Loan

s_frenchie91

Hi everyone, just looking for some advice please.
We bought our house in April 2019 using the 20% help to buy loan.
Fixed rate mortgage is up in Nov 2020. I believe we could remortgage and pay off the loan but my question is should we do this now (less than 2 years into the HTB) or wait until the 5 years is up?
Thank you! Steph 

grumiofoundation

s_frenchie91 said:

 I believe we could remortgage and pay off the loan 

Can you? Will you have enough equity in the property?
Without more details no-one will be able to advise.

What is the property worth, what is the HTB loan amount and outstanding mortgage?
What will be the interest rate after remortgaging and what is the interest rate now?
Do you predict the property will go up or down in value over the next 3 years?

s_frenchie91

grumiofoundation said:

s_frenchie91 said:

 I believe we could remortgage and pay off the loan 

Can you? Will you have enough equity in the property?
Without more details no-one will be able to advise.

What is the property worth, what is the HTB loan amount and outstanding mortgage?
What will be the interest rate after remortgaging and what is the interest rate now?
Do you predict the property will go up or down in value over the next 3 years?

Thank you for trying to help. 

I bought the house for £370k with a £74k HTB loan. Outstanding mortgage is £242k. 

I could remortgage on 1.7% fixed for 3 years, or 2.4% if I add on the additional £74k.
I haven’t had the meeting with my mortgage advisor yet but from completing their online form I could borrow an additional £85k which could potentially clear my HTB loan, if the house hasn’t gone up in value too much. 
I don’t know how I would predict whether house prices will go up or down in the next 3 years, I imagine it will go up but not massively, but can’t be sure!
So I’m unsure whether to remortgage on 1.7% and save money for the next 3 years to put towards paying off the HTB loan at year 5 (I think I could save around £20k) or remortgage and add the HTB loan onto my mortgage now.
Many thanks.

grumiofoundation

Based on numbers you have given my brief calculations are below: (Do please check my maths!). 

at 1.7% you pay 4114 interest per year on 242k (HTB interest free).

but if you remortgage to 2.5% (total mortgage now 316k) You will be paying 7900 in interest.

So over the 3 years remaining on interest free HTB period that’s extra 11400 you would pay in interest.

In order for remortgaging to have been ‘worth it’ House value would have to rise by more than 57000 in value over next 3 years (11400 = 20% of 54000). 

Therefore In my opinion seems sensible not to pay off loan due to the extra interest you have to pay. And even in the event house value has risen by >57000 at that point you will be able to easily remortgage to <70% LTV including paying off HTB loan.

 Edit: and in event house has risen by <57000 you have saved money and have lower monthly repayments, enabling you to save more in the meantime.

s_frenchie91

grumiofoundation said:

Based on numbers you have given my brief calculations are below: (Do please check my maths!). 

at 1.7% you pay 4114 interest per year on 242k (HTB interest free).

but if you remortgage to 2.5% (total mortgage now 316k) You will be paying 7900 in interest.

So over the 3 years remaining on interest free HTB period that’s extra 11400 you would pay in interest.

In order for remortgaging to have been ‘worth it’ House value would have to rise by more than 57000 in value over next 3 years (11400 = 20% of 54000). 

Therefore In my opinion seems sensible not to pay off loan due to the extra interest you have to pay. And even in the event house value has risen by >57000 at that point you will be able to easily remortgage to <70% LTV including paying off HTB loan.

 Edit: and in event house has risen by <57000 you have saved money and have lower monthly repayments, enabling you to save more in the meantime.

Thank you so much this is so helpful

getmore4less

Are you sure you can get a 3y 1.7%  HTB remortgage/product transfer at ~65%-70% LTV

which lender?

Adding the loan takes you 85% LTV  should be able to get a 2y fix under 2%

With a full term/payment you can run the numbers for the  amounts/rates