Help-to-Buy + Mortgage renewal - stay on Equity Share or buy out?

Philzo93

Hi all, 

I'm hoping to get some advice on this as my current offer runs out in May but want to have a solid plan before speaking to a broker. 

I am currently on a H2B mortgage, Equity Share arrangement (Government owns 20% of the house right now). I bought the house at £325,000 and it is currently worth £370,000 (based on neighbours recent sale which is a similar build to ours). We are currently with TSB on a 1.3% fixed for 3 years which is due to end in May. Obviously, in this climate, I will be looking at something at least 4.5% based on a rough search on a comparison site by the time I renew. 

The original plan was for the bank to buy out the 20% (which currently stands at around £74,000) and remortgage on a 82% LTV arrangement. Unfortunately, I am not sure this is possible giving the recent climate and any comparison site or advice I have seen has nothing on help-to-buy mortgages. 

I can still extend the mortgage as H2B one for another two years before having to pay interest on the Equity Share Loan. Will it be affordable for me to persuade a mortgage lender to pay another £74,000 on top of the forecasted £215,000 mortgage value I will have left come May 2023? 

Thanks in advance all.

chanz4

With the help to buy rates, I would pay its interest instead

Philzo93

chanz4 said:

With the help to buy rates, I would pay its interest instead

Firstly - love the signature. 

Secondly, could you expand on this please? Just so I fully understand. 

kingstreet

Your monthly payments for the £65,000 HTB loan will be £94.79 in year six. The rate is 1.75%pa. This increases in line with RPI+1% each year, so the rate will be 1.925%pa in year seven (assuming 10% RPI) and the monthly payment £104.27.

Philzo93

kingstreet said:

Your monthly payments for the £65,000 HTB loan will be £94.79 in year six. The rate is 1.75%pa. This increases in line with RPI+1% each year, so the rate will be 1.925%pa in year seven (assuming 10% RPI) and the monthly payment £104.27.

Okay, I've got two years to worry about that though. What I'm getting from this is perhaps ride it out on a H2B mortgage for the next two years interest-free then revisit in the hope the market is much more favourable? 

kingstreet

Philzo93 said:

kingstreet said:

Your monthly payments for the £65,000 HTB loan will be £94.79 in year six. The rate is 1.75%pa. This increases in line with RPI+1% each year, so the rate will be 1.925%pa in year seven (assuming 10% RPI) and the monthly payment £104.27.

Okay, I've got two years to worry about that though. What I'm getting from this is perhaps ride it out on a H2B mortgage for the next two years interest-free then revisit in the hope the market is much more favourable? 

It makes sense unless you stand to lose out more from property price increases causing the HTB redemption to increase.

maveli

@kingstreet any idea which all lenders offer remortgage with an HTB loan (keeping the HTB loan as it is) ?

simon_or

Philzo93 said:

Hi all, 

I'm hoping to get some advice on this as my current offer runs out in May but want to have a solid plan before speaking to a broker. 

I am currently on a H2B mortgage, Equity Share arrangement (Government owns 20% of the house right now). I bought the house at £325,000 and it is currently worth £370,000 (based on neighbours recent sale which is a similar build to ours). We are currently with TSB on a 1.3% fixed for 3 years which is due to end in May. Obviously, in this climate, I will be looking at something at least 4.5% based on a rough search on a comparison site by the time I renew. 

The original plan was for the bank to buy out the 20% (which currently stands at around £74,000) and remortgage on a 82% LTV arrangement. Unfortunately, I am not sure this is possible giving the recent climate and any comparison site or advice I have seen has nothing on help-to-buy mortgages. 

I can still extend the mortgage as H2B one for another two years before having to pay interest on the Equity Share Loan. Will it be affordable for me to persuade a mortgage lender to pay another £74,000 on top of the forecasted £215,000 mortgage value I will have left come May 2023? 

Thanks in advance all.

I would keep the equity loan untouched as it gives you a govt guaranteed interest rate that is currently far lower than any mortgage rate you can get on the market. I remember seeing a post from KS which calculated that even if inflation was 8% every year from year 6 onwards, the rate on the equity loan would still be much below 3% in year 10.

There is the risk of the govt getting a bigger slice of the pie when you sell or pay it off, but otoh they are also taking on a share of the risk of house prices falling/stagnating.