Help to buy 5 year term expiring and remortgage

DebtFreeWannabe88

Hi all,

Currently on year 3 of our 2nd, 2 year fix and due to refix in March 2023. By December 2023 our HTB 20% is up and I don’t know what to do next.

I’m on a DMP so entering another 2yr fix with current mortgage provider is likely the only option open to me. 

I don’t think financially remortgaging to borrow the money to pay it off at this stage is an option given the DMP.  When the HTB 5 year term is up, what on earth do the repayments look like - I need to be prepared for the repayments. 

Original 20% borrowed was £65,000 but if repayment is based on current valuation then it’s more like to be £80,000 - I’m not even sure if that’s how it works - I don’t want to bother my FA with this just yet as I’m forever taking up his time with silly questions!

I hope this makes some sense, I’m really confused by it all!

TIA x

silvercar

At the five year point you start paying interest on the 20% HTB amount of £65,000. 

The interest rate for the 6th year, ie after you have had 5 free years, is fixed at 1.75%. In following years it increases by CPI+2%. So the 1.75% increases by 2+8.8=10.8%. So the 1.75% will become 1.939% at the current CPI rate.

The original government intention of the scheme was for people either to have moved on or to have re-mortgaged to include their HTB loan by year 6, at least in the majority of cases. So it was meant to be fairly punitive, but with recent interest rate rises, leading to higher mortgage rates, the HTB loan doesn't look extortionate at all!

Bottom line is you will pay £94.79 a month for the interest on the HTB component. Increasing to £105.03 the following year.

DebtFreeWannabe88

That’s fantastic thank you very much- exactly the breakdown I needed 😊

chanz4

payments are around £50 on a loan of 40k

silvercar

chanz4 said:

payments are around £50 on a loan of 40k

£58.33 in the sixth year, then it increases annually.

chanz4

silvercar said:

chanz4 said:

payments are around £50 on a loan of 40k

£58.33 in the sixth year, then it increases annually.

not what Im paying and Im on help2buy until tom

silvercar

chanz4 said:

silvercar said:

chanz4 said:

payments are around £50 on a loan of 40k

£58.33 in the sixth year, then it increases annually.

not what Im paying and Im on help2buy until tom

Details here: https://www.gov.uk/help-to-buy-equity-loan

In particular the worked example quoted is for an equity loan of £50k,

"Interest payments

You do not have to pay interest for the first 5 years. In the sixth year, you’ll be charged interest at a rate of 1.75%. This will be applied to the equity loan amount you originally borrowed (the equity loan percentage of the property purchase price). This annual interest is spread over the year in monthly payments.

Example

Property purchase price	Equity loan percentage	Equity loan	Annual interest payment in year 6 (1.75% of the equity loan)	Monthly interest payment in year 6
Bought for £200,000	Borrowed 20%	£40,000	£700	£58.33"