Unsure what to do!

samps1973

I asked my advisors opinion on whether I'd be better off with htb or a standard mortgage. This is what he said.

This is a very tough one to call

 

As we discussed if you were to buy a Newbuild you could buy a more expensive property with cheaper monthly payments

 

You will have a further loan to pay off at some point in the future but with the £200+ saving per month, this shouldn’t be a problem.  You could overpay £200 per month on the mortgage (meaning the balance would have reduced considerably after the first 5 years and then at the point you would start paying the monthly interest instalment for the help to buy loan, we could look into raising money against your mortgage to redeem the help to buy loan.

 

That way you increase the mortgage but this will then be fully paid off by the end of the mortgage term and so you own the property outright

 

If you prefer a second hand property then we can also arrange this.  Based on the last 3 months payslips the mortgage is still likely to be £151000 so the maximum you could buy for would be £161000 which will limit your choice.

 

The other thing to bear in mind with all of this will be maintenance.  If you buy a Newbuild there should be very little you need to spend on the property as everything is brand new.  If you buy a second hand property, assuming there are installed white goods, these could be old and need replacing.  You may need to redecorate.  The boiler may be old etc.

 

Lastly and really important to consider is the service charge and ground rent.

On a second hand flat you will have to pay a monthly service charge and an annual ground rent.  You should check how much each of these is and how and when they can increase

On a Newbuild flat you will only have service charge (as they are no longer allowed to charge a ground rent when using help to buy), but again its worth finding out the cost of this

--------------------------

He also told me that you can pay at least 10% of the equity loan as an over payment but to avoid doing this unless I have a substantial amount to pay with as each time you pay theres fees for solicitor and valuation fees etc and that if he was in my shoes he would overpay as much as possible, remortgage and then continue repaying as much as possible.

 

 

MovingForwards

I would be trying for an older property first, asking the EA to speak with the seller and confirm the annual charges, when they go up and by what percentage, or if there's only a couple of potential properties download the lease from the land registry website and read them for myself.

Have H2B as your backup.

I've messaged you a few links.

samps1973

At the start of this thread I wasnt sure that at the age of 48 where i stood in the mortgage world.

At first i thought i could possibly scrape at getting a 25% shared ownership mortgage and also though that doing that would be better than just renting.

From what I a have learned from you guys and my adviser, I have just been approve for a help to buy mortgage with Santander which is 1.73% on a 5 year fixed. The property cost £192k
9.6k deposit 38.4k equity loan and a 144k mortgage.
I will re mortgage every 5 years to clear the equity loan and pay off as much of the capital as I can over the next 5 years while the equity loan interest is 0%. It will be good knowing that every £1 i pay off the loan will be saving loads of interest.

The developer and estate agent  tried to charge me ground rent, my adviser made it clear that they can't charge ground rent on HTB new builds, they swiftly removed it from the reservation form. I  needed to add that so whoever's reads this doesn't get caught in the trap.

Things are cheaper than I thought. My adviser advised against getting a building survey as new build comes with a 10 year structural warranty and with the location of my flat which is the top floor they couldn't really survey much anyway and he said it's quite rare to have survey on a new build. So that saved me loads.
The valuation survey with Santander is free. Also they give you £250 cashback towards the legal fees.
The developer is paying a £1,000 toward the legal fees which I have in writing although I will add that you pay extra fees to the solicitor because it a new build and help to buy and leasehold as it's more work for them.

The conveyancing bill was originally £2500 in total because of the additions. So in total I am paying £1250  which is a lot cheaper than i thought over all.

Happy days.

Thank you to everyone who has helped and guided me in the right direction on this stressful journey, especially @MovingForwards sorry for giving you a headache 😀

Hope this helps someone that is on the same boat as I was. 👍

MovingForwards

@samps1973 congratulations! I'm so pleased for you 😃😃 I promise no headache was inflicted and I'm glad the info helped.

Solicitor fees seem a lot more realistic now and I wish you well.

Start packing as you're moving to your own home soon!

Runningmad

Oh wow great news. When will it be ready? We are still waiting for our plot to be released, so fingers crossed its with in budget.
Keep us posted and good luck. 

samps1973

Thanks guys, luckily it's already built so just have to wait for the solicitors to do their stuff now. I've done enough stressing over the last month so just gonna let them get on with it and put my feet up. Theres no chain so hopefully not too long maybe 2 or 3 months I should think.

I'm celebrating with a takeaway and a tub of Ben&Jerry's 😁

Cheers 👍

mark55man

great and well done ! 

Many posters on here come looking for confirmation, not education.  This thread has been great as literally we have seen your plan evolve and get you to so much of a better place than you had imagined possible

Fufu3333

I have been following your journey. Congratulations on achieving a great result. Just wondering what is your monthly mortgage payment and what is your service charge?

samps1973

Hi @Fufu3333

I'll write the figures here so people can hopefully take what they need from it if they come across this thread in the future.

I'll also try and use what my adviser has shown me.

Property value £192k
Mortgage 144k   75%
Equity loan 38.4k  20%
Deposit  9.6k    5%

My mortgage is for 26 years and I'm 48 as Santander give you a mortgage up to 75.

My mortgage payments on the 5yr fixed rate is £577.40 per month. I will be paying as much as possible extra to get the capital down and you can pay 10% extra of the remaining balance of your mortgage fee free. So in the first year as the mortgage is a 144k I can pay 14.4k extra fee free (not that I'll have that much spare) 🙂.

The service charge is a certain % of the property or something like that and works out to be £816 pa or £68pm.

There is no ground rent as they are not allowed to charge this on HTB new build properties, even though they tried too. They tried charging me £250 per year but my adviser put them right. Apparently ground rent can double every 10 years which would mean in 60 years could work out to be £16k per year and my daughter would struggle to sell it, so I'm happy about that.

At the 5 year stage I will start paying the interest only on the equity loan which will be £56 per month. Its 1.75%pa to start and slightly increase per year. At the 5 year stage the mortgage will switch from the fixed rate which is 1.76% to the standard rate which is currently 3.35% variable.

My adviser explained at the 5yr stage is the best time to remortgage. At that stage the deposit on the new mortgage will now be the £9.6k I put in at the beginning + the equity loan amount of £38.4k= £48k plus the amount you have paid off the capital over the 5 years. If we forget the interest for this calculation and say I pay a £1,000 per month for 5 years this would work out to.
£48k + £60k ( 60 months at £1k)
= £108k
This amount will now be the amount that will be classed as your new deposit on the new mortgage and a much better loan to value.
My adviser said if I was at the 5 year stage now and re mortgaged the interest rate would be 1.2% as the the amount of deposit will be so big and you will get the best rates available.

With the new mortgage amount you will pay off as much of the equity loan as possible depending on the properties value at the time on another 5 yr fixed. Then again pay as much as possible off over the next 5 yrs and repeat this until you are left with no equity loan and just a mortgage. The deposit will grow each 5yrs so you will continue to get the best rates available at the time. Eventually you will just have the mortgage and no equit loan.  

I hope that's easy to understand. 

You guys have helped me so hopefully this will help someone else.

Thanks

MovingForwards

There's a minimum 10% that can be paid off H2B loans, plus you've got fees each time.

The main thing you need to do is chase that 10% or 20% extra equity ready for when the 5 years are up as that H2B rate could get a bit much when interest rates start to increase. It can be a mix of equity and savings.

You may be able to borrow more from your lender in 5 years to cover the H2B (equity or savings or mix), it all depends on what deals are around and who is the best lender when your current deal is up.

If you save the 20% then you can just pick another fix and not remortgage to another lender.

Have a play with a mortgage calculator to get a good idea about how your overpayments alter the interest element of the contractual payment. It helps with future planning to know where you could be by paying off £x extra per month.

If the 10 year doubling ground rent charge was left in the lease, you wouldn't have got a mortgage offer for the property. Lenders really don't like them.