Getting out of help to buy

Locornwall

Speculative question, as I don’t think there is a solution.

We would like to pay our help to buy element of our house off ASAP. In hindsight maybe I shouldn’t have taken a 5 year fixed rate, anyway we are 15 months into the mortgage and there is an ERC if we remortgaged. Apart from having the money ready to pay off the 20% which will workout approximately £90k if there anyway of paying this back? I even called them to ask if we could have another form of credit running alongside the existing mortgage but help to buy said no to this.

rachlikeswinter

I thought the help to buy 20% loan is interest free for 5 years? Surely just leave it be, then remortgage at that time? Makes no sense to pay it off early, unless you have the amount in cash sitting there doing nothing.

Locornwall

I see your point, that was my take first but don’t forget it’s 20%. So if prices increase, which they already have, I pay back a lot more potentially. Also you can’t do any significant home improvements, which will no doubt also add value to the house. It’s definitely a ticking time bomb if some people don’t watch out, especially with more expensive houses.

Thrugelmir

Are you overpaying your mortgage by the maximum permissable amount? This will at least reduce the ERC. 

If house prices are rising as you say. Then it's a number crunching exercise to determine which is the bettter option. 

Locornwall

Yes I get you. Looks like I’m trapped in for the time being, just hope house prices don’t go up. Can’t see how they can where I live.

rachlikeswinter

Locornwall said:

 So if prices increase, which they already have, I pay back a lot more potentially. 

Yes but also the 80% you own would be worth more - so if you sell you still make a profit on your original investment. If prices increase that much in the next 5 years that you can't afford to re-mortgage to purchase the remaining 20%, then you sell.

Language like 'a ticking time bomb' and 'I'm trapped in' seems to suggest you view the HTB loan quite negatively; surely you wouldn't be living in the house you are, without it? I appreciate it's not exactly a perfect scheme but why do you seem so regretful? You've got a (presumably) lovely new house and are only paying a mortgage on 80% of it while the taxpayer gives you a free 5-year head start on positioning yourself to be able to buy the rest (or sell) at the end of that period. Doesn't seem like you're trapped to me! Focus on overpaying / saving / earning more so that in 5 years you can own 100% of it. Very achievable.

Locornwall

Yes definitely I’m happy with the house, no regrets. I just wish they’d let us pay something reasonable off the HTB. The minimum they accept is 10% of the value of the house. So that may be about £45k minimum each time. I personally cannot see house prices going up that much in my area anyhow. If we have another situation such as 2008 then maybe the opposite.

MFWannabe

I’m a little confused. You say about 90k being the amount you would have to have to pay off the htb. Do you have this or anything to pay any off? Your last statement said the minimum they accept is 10% of the value of the house. What do you mean by this? 
Clarify: 
You are 15 months into the mortgage and therefore the htb? 
Amount outstanding on the help to buy? 90k? 
Have you paid anything off it? Are you allowed to pay anything? If so how much? How much can you afford to pay off per month/ year? 

Carl2510

From what I’ve read you seem to have the money right now to pay off the HTB, that is some saving in 15 months, wouldn’t of been a better option to wait those 15 months to have that kind of deposit and avoided the HTB. 

You’ve effectively given yourself a loan with possible higher payment back due to higher increase in house prices when you could of avoided it.

rachlikeswinter

Carl2510 said:

From what I’ve read you seem to have the money right now to pay off the HTB, that is some saving in 15 months, wouldn’t of been a better option to wait those 15 months to have that kind of deposit and avoided the HTB. 

You’ve effectively given yourself a loan with possible higher payment back due to higher increase in house prices when you could of avoided it.

I think OP is saying they don’t have the £90k to buy the loan back. Otherwise that is what they would do. But aside from having that cash - which it appears they don’t - they’re saying the only other way is to remortgage, which they can’t because they’re in a 5 year fix and don’t want to pay any ERC. So they need to wait until end of free interest loan period and then remortgage to hopefully 100% at that point. 

dimbo61

What you need to do is quite simple !
You need to overpay your existing mortgage provided you have no other expensive debts.
Best way to do this is overpay each month.
The HTB loan is interest free for 5 years.
Now if 20% of your property is £90,000 then you have a £360,000 mortgage ?
I am willing to bet you £10 that your fixed rate residential mortgage allows 10% Overpayment each year.
So all you need to do overpay what you can afford each month.
If you can afford £36,000 in the first year great ! That would be some going.
Like I said overpay whatever you can afford.