Help to Buy Loan - pay off with a mortgage advance (or not)?

Scarpy

Hi 

Hoping to get some thoughts on my Help to Buy Equity loan situation. Specifically, weighing up the options between paying it off with a mortgage advance, or just leave it and pay the interest until we sell the house.

We are coming up to the end of our 7th year in our home (which we took an HTB equity loan for). so we have been paying the interest fees on it for 18 months or so now. It will be time to remortgage and I'm trying to understand my options.

Our plan is probably that we will sell this house to relocate in 2-5 years time.
All the advice I can seem to find says to pay pay off the HTB loan as soon as you can. But as mortgage rates have risen pretty significantly, isn't there something to be said for leaving it where the interest is lower?

I've tried to compare the options based on selling the house in 4 years time and either way, it doesn't seem to make much difference to how much we will pocket after the sale.
I made the assumption that house price would rise 3% a year and that the remortgage rate of 5.44% that I'm looking at would stand for the four years.

To give a bit of detail

House was bought for £214K
Current value looks to be approx £300K
Mortgage remaining £120K

Would really appreciate thoughts on this. It's hard for me to understand why everyone emphasizes the importance of getting rid of the equity loan as soon as possible.

chanz4

leave on the htb one

silvercar

Now that interest rates have risen, the HTB loan is on a favourable rate. The risk is that if you think house prices will rise, you will have more to p\ay back.

GMac14

Looking for some similar advice for the future.

Purchased house in March 2021 for £210k with 5% deposit and 20% from HTB loan.  Mortgage (20 years) was £157k but with occasional overpayments it now stands at £144,400 with coming up to 18 years left. Mortgage is fixed 5 years at 1.99% due to renew in 2026. 

Same style house (new build) on same development now being sold by builder for £255k but some selling privately at £270k. Difficult to speculate what house will be worth in 3 years but if valued at £250k then HTB loan will then be £50k

Goal is to overpay every month for next three years, mortgage £800 and I can possibly overpay £275 per month, looking at overpayment calculator that would bring mortgage down to £113k in three years when we are due to get a new deal, if HTB loan of 20% is then around £50k will then look to remortgage for 163k to pay off HTB but would be then over 15 years rather than original term of 20 years as 52 years old this year.

Just wondering if a better option maybe to keep the HTB loan and pay interest on that separately but not sure what interest payments or figures on that would be.

Any guidance appreciated. 

housebuyer143

Are the payments due to increase? This is what gov.uk says "The interest rate increases every year in April, by adding the Consumer Price Index (CPI) plus 2%.".

If your payments on htb are going up to like 10% then you should definitely add it to the mortgage.

renegade1

Here's my strategy:

Purchased HTB property in 2018. Will not remortgage and add HTB loan to the mortgage until the result is <= 60% LTV which means having to keep the HTB loan for another 5 or so years without any overpayments. I think overpaying is the wrong strategy. Of course this means i'm going to be paying HTB interest for 5 years but this is so low that it doesn't worry me. Any spare money is going to stocks and shares ISA.

This strategy is for those who like to live on the edge 

renegade1

housebuyer143 said:

If your payments on htb are going up to like 10% then you should definitely add it to the mortgage.

Even after 15 years you will only be paying 5% HTB interest. This even assumes 8% annual inflation! It will never get to 10%

housebuyer143

renegade1 said:

housebuyer143 said:

If your payments on htb are going up to like 10% then you should definitely add it to the mortgage.

Even after 15 years you will only be paying 5% HTB interest. This even assumes 8% annual inflation! It will never get to 10%

I see what I did 🤣 yes, that makes sense. Do not pay it off then.. No point. 

renegade1

housebuyer143 said:

renegade1 said:

housebuyer143 said:

If your payments on htb are going up to like 10% then you should definitely add it to the mortgage.

Even after 15 years you will only be paying 5% HTB interest. This even assumes 8% annual inflation! It will never get to 10%

I see what I did 🤣 yes, that makes sense. Do not pay it off then.. No point. 

I wouldn't got as far as no point. If you value certainty and piece of mind then it makes sense to pay it off. 

GMac14

Better option might be to try and pay a chunk off the HTB amount and then pay HTB interest seperately? Im expecting HTB loan amount to be around £50k, I wont be able to pay 50% off but may be able to pay 25% off, As far as I can remember there is a limit to number of payments that can be made to HTB or they have to be of a minimum amount?

renegade1

GMac14 said:

Better option might be to try and pay a chunk off the HTB amount and then pay HTB interest seperately? Im expecting HTB loan amount to be around £50k, I wont be able to pay 50% off but may be able to pay 25% off, As far as I can remember there is a limit to number of payments that can be made to HTB or they have to be of a minimum amount?

The mimumum you can pay is 50% :-(