HTB advice needed regarding deposit.

Runningmad

Hi.
We are about to start the process of buying a house with the government HTB equity loan. 
Originally the mortgage company said we would need to pay
10% deposit 20% HTB 70% mortgage. Since then our earnings have increased today they have said we can do 5% but that would mean 75% mortgage. Surely it's better for us to have less mortgage? The advisor said keep the other 5% in savings and use towards paying off the equity loan. 
Any help/advice would be gratefully received as its always helpful to see other points of view.
Thank you for reading. 

getmore4less

AIUI the equity loan can only be paid of in one or two chunks(10%,20%)

think about
how much that 5% will cost if you keep the cash.
does the lender reduce rate for 70% over 75%

How long to save the other 5% to get to the first 10% chunk.
How long to save to get the full 20%.
How long before save and mortgage pay down get to that 10% or the 20%

How much will the property value go up/down

Why can't you do 10% 15% 75%   can you do 10% 90% and bypass H2B

typical scenario are save and pay of the H2B
Overpay the mortgage to reduce interest and get extra borrowing to pay of the H2B when ready

eg to do the first chunk in 2 years saving or smaller mortgage

looking at a lenders(Barclays) 2 year no fee rate. and £100k to get some numbers.

to get to 70% from 75% in 2 years total 10% with 5% savings  to pay off 1/2 the H2B
mortgage would need to be a payment equivalent to 25 year 3 months

amount	rate	payment	owing	interest
£75,000.00	1.44%	£295.39	£70,001.95	£2,091.37

if you started with 70% and same payment

amount	rate	payment	owing	interest
£70,000.00	1.44%	£295.39	£64,856.01	£1,945.37

would be £144 better off over the 2 years.  

I think many just go with the 5y plan and a 5y fix and see what it looks like in 5 years.

One missing bit of info is what can you afford per month as that can drive the time line against property value.

bottom line is will the 20% at 0% and the mortgage at H2B 75% be cheaper then the equivalent non H2B rate

for Barclays the 5y H2B 1.56% or the 90% LTV rate 2.88%
say over 35years with same payment

amount	rate	payment	owing
£90,000.00	2.88%	£373.64	£79,839.54
£70,000.00	1.56%	£373.64	£52,374.36

on H2B you take out extra borrowing to pay off 20%
to have the same debt and be no worse off that's ~£27500, say £27k after fees

The property value can go up by  35% over the 5 year before you would be worse off using H2B
(it is potentially less as without H2B you could chase the rate down sooner 


One final point if there is no rate benefit of the bigger deposit.
If you go 5% 20% 75%  and change you mind you can overpay with your cash, 
if you go 10% 20% 70% you can't change your mind.

Runningmad

Thank you for replying, I'm sure I recognise your name from previous replies that were helpful.
I shall go through all your points. 
Thank you again 

chanz4

I would take less equity loan, pain in the rear to pay and costs a lot to redeem with sols etc

kingstreet

You can consider either a lower mortgage or smaller HTB equity loan as chanz has suggested.