Help to buy / Re Mortgage help needed

claires_123

I know there are a few posts about this already. I'm just so confused & also extremely worried about what is going to happen. I don't know what to do for the best.
Our help to buy needs paying by August 23 (before we start paying interest)
Our 5 year fixed mortgage ends June 23 (early repayment before this date is just over £8K)
I have so many questions, when do we start looking to re-mortgage, do we add the HTB loan onto the re-mortgage is it better to bite the bullet & just pay it off? Is there a more sensible & financially better way to do this? How long do you take the new mortgage out for - I was stung in 2008 by taking out a 4 year fixed then the interest rates fell so low.
Any advise would be perfect, there are some very finance savvy people on here, I hope someone can help.

kingstreet

When you start paying interest on the HTB loan, it starts at 1.75% pa. If you consolidate it now, you'll be paying more on that and on the mortgage and have a higher LTV. If you think property prices might be pretty static for the next couple of years, your HTB liability won't increase so you might be better off sitting on your hands and waiting for a year or two.

Look at your existing lender for a product transfer/rate switch in January/February for June.

renegade1

Kingstreet nailed it. I'm on help to buy too and my 5 year fix is ending Nov-23 at which point i'll start paying interest on the htb loan. I've decided to hang onto the loan for another couple of years as the interest rates on the loan will be lower than the mortgage.

Initially my plan was to add the loan to the mortgage after 5 years but increasing interest rates changed this plan.

There is also rising house prices to consider as this effectively increases the interest you pay on the loan but forecasts say that house prices will stagnate now so hopefully evertthing should work out.

chanz4

We have just redeemed ours after having it since 2013 very painfull process

JJG1984

I read an interesting spread a few months ago around redeeming at year 5 vs year 10 and this was before the recent interest rises. Ill try find it for you

I have just fixed for 5 years which will take me to 7, if interest rates have not dropped i will fix for another 2/3 and redeem around 10.

The money saved will serve as overpayments and your LTV should be in the 30% bracket by then

1.75% on 20% of the purchase price vs 3.2% if your lucky; im confident with my choices 

SuboJvR

As usual MSE forum to the rescue and has helped me put my mind at ease a little.

Our Help to Buy interest free period comes to an end in a couple of months, but I last fixed our mortgage to take us to August 2024 (at 1.99%) with a view to considering redeeming/paying off then HTB then as it made a bit more sense for us with how the numbers may stack up.  Essentially, I only really wanted to do that once the interest on the HTB portion would be greater than mortgage interest.

That was before mortgage interest rates started climbing, of course.

Kingstreet has hit the nail on the end - in your shoes, as we could have been, I would not want to remortgage now to swallow up the Help to Buy.  Work through the interest calculations on the loan itself and you'll see it will be less than you would pay on that amount of loan in your mortgage. 

In fact I sort of feel a little bit like by having some money locked into HTB we are doing ourselves a favour whilst the rate of interest on it is lower than whatever our re-mortgage might be in August 2024.  I'd rather leave it there until it starts exceeding the mortgage interest!

Disclaimer being we are quite happy with our house, location etc, no plans to move.

Your Help to Buy does NOT need to be paid off before you start paying interest.  It sounds like a scary milestone of course, but it's actually a little bit of a gift just now I think.

Altior

There is a potential negative of delaying the repayment of the equity loan. If the property appreciates significantly in value in the interim. Although with interest rates rising, that seems less likely. It could work in reverse of course, nobody knows. Going into April of year 7 could be quite punitive, and a potential trap, so an exit strategy is a must. 

SuboJvR

That’s a fair point also.  I always had it in my mind though that it gets offset by our equity in the property also then being greater, so opening up options for remortgaging.

There are all so many variables, and we cannot predict the future - I just know that I rather be here in this house with a mortgage of my own than renting a smaller property for the same amount.

Altior

Yes it's a double edged sword.

I had something of a similar decision to make, as I was in a shared equity agreement. Which is far less generous, but it was a year or two before the far more beneficial HTB was announced. The longer I delayed staircasing, the larger the amount I needed to buy the remaining percentage was. 

It was the rental being linked to RPI that eventually convinced me to fully staircase. I've not seen anything in the news about these agreements as it happens, but some people will be seeing significant rent increases come April. Mine was RPI +0.5%, which was fine in the low inflation era.

chanz4

Altior said:

There is a potential negative of delaying the repayment of the equity loan. If the property appreciates significantly in value in the interim. Although with interest rates rising, that seems less likely. It could work in reverse of course, nobody knows. Going into April of year 7 could be quite punitive, and a potential trap, so an exit strategy is a must. 

we borrowed £28,500 in 2013 and have just paid back £41,800 .  So £13,300 they have had extra but I have gained £79,800 extra on the value even with the £13,300 taken off  

Altior

Yes of course your personal balance sheet benefits overall from the asset value rising. 

However your experience is in an era of generally low inflation, and low interest rates, and rapid appreciation of property, generally. It is however an illiquid asset. 

Not a great deal I'm assuming, but you must have been paying interest on the gvt loan too, as well as eventually paying the capital element off. If you added it to a current mortgage, interest will be levied on the higher amount. You may well have paid it off in cash, but the OP is mentioning potentially adding it to an existing mortgage.