Help to buy advice

Ybe

Generally with help to buy, is it better to take out the largest equity loan possible or is better to only take out the percentage you need as an equity loan and put the rest to mortgage? 

The advantages I see of taking out the largest equity loan possible are that it’s 0% interest for 5 years, it’s an equity loan so if the market value of the property goes down (possible on an inflated new build), the equity loan lender will take part of the hit as the amount repayable will also go down. 

The disadvantages I see is that if aiming to repay the equity loan 100% then it might be more difficult to do this (although this may be very difficult anyway with inflated new builds). Another is that if the property goes up in value and you sell, you’ll have less of a share of the equity. 

Louise_G_1983

When you redeem the HTB loan, they will take the figure the property is valued for at that time or what you sell for, whichever is highest, so be aware of that. If you're not selling and redeem after 5 years you'll still pay against the new valuation or what you paid if the property has decreased in value so the lender is protected. I would therefore only borrow what you absolutely have to to avoid giving away too much equity in the future. 

K_S

Louise_G_1983 said:

When you redeem the HTB loan, they will take the figure the property is valued for at that time or what you sell for, whichever is highest, so be aware of that. If you're not selling and redeem after 5 years you'll still pay against the new valuation or what you paid if the property has decreased in value so the lender is protected. I would therefore only borrow what you absolutely have to to avoid giving away too much equity in the future. 

@louise_g_1983 That isn't correct afaik. If you're not selling, if the property has decreased in value, your equity loan amount also goes down in the same proportion.

From the govt H2B equity loan guide -

getmore4less

Crunch the numbers.

There are 2 elements to the savings with H2B
up to 20%  interest free
up to 75% at a lower rate than if you borrowed at higher LTV eg. H2B 75% is cheaper than 95% LTV without H2B
once you have the rate options you can run the 5year model and work out how much the house can go up before you are losing out using the same payment.

For a 75/95 scenario it was over 40% last time I looked but the 95% rates are creeping down
I think most lenders tend to have 75% H2B only some may have better rates if your LTV on the borrowed is a bit better can

You still need to have a clear exit plan for around the 5 year mark or be ready for the interest to start..

Louise_G_1983

Apologies, Im sure those were the terms of my HTB scheme but I'm no expert. 

lonibra

OP, personally I would take out max and it's 0% and also gives me a hedge against prices falling.