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

GMac14

Thanks renegade1, I found some figures online, our HTB Loan is £42k and the example I found was for £40k HTB loan so pretty close,
Year 6 pay 1.75% / £712 interest per year,
Year 7 pay 1.8% / £733
Year 8 pay 1.86% / £755
Year 9 pay 1.91% / £777
Year 10 pay 1.97% / £800

Figures may rise slightly but looks like might just keep HTB loan and pay interest on that but maybe try and save 50% and pay half off.

Wongus

renegade1 said:

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 

In a similar position having purchased a HtB property in 2018. My approach is exactly the same as yours, I will not be remortgaging to pay off the HtB loan if it means a higher interest rate than the HtB interest. Which is why I am assuming you wouldn't do so unless it would result in <60% LTV?

I also see keeping the HtB loan beyond the interest free period as protection against any downside in property value (and thus a option on repayment), do you take that view also?

silvercar

The risk is that prices increase and your HTB loan value increases, costing you far more than the savings by having a low interest rate on your HTB loan.

chanz4

I was in this situation upto sept last year but had been paying the interest on h2b. To be honest wished had waited but paying off is a big pain in the bum and costs around 1500 with the costs

Wongus

silvercar said:

The risk is that prices increase and your HTB loan value increases, costing you far more than the savings by having a low interest rate on your HTB loan.

It's all down to personal circumstances, I am unlikely to see much price increase for a new build London flat. When I move in the future, I am not planning on keeping the flat. Therefore if prices were to increase substantially (which is a real risk), then I will have some increase in equity for my next property, and the government will have rightly gained for providing me the interest free equity loan.  

This is not withstanding, the cash savings generated from having a low LTV mortgage for 5 years and the interest saved from the equity loan.

I truly think HtB has not been appreciated enough.  

renegade1

Wongus said:

renegade1 said:

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 

In a similar position having purchased a HtB property in 2018. My approach is exactly the same as yours, I will not be remortgaging to pay off the HtB loan if it means a higher interest rate than the HtB interest. Which is why I am assuming you wouldn't do so unless it would result in <60% LTV?

I also see keeping the HtB loan beyond the interest free period as protection against any downside in property value (and thus a option on repayment), do you take that view also?

Yes absolutely. House prices are dropping this year so it doesn't make sense to pay it off right now. Actually I've decided to change my strategy a bit due to low interest rate forecasts in two years and also that house prices are forecasted to rise rapidy again after 2024/2025. Therefore I've decided to be a bit more aggressive with overpayments and will try to redeem the loan in 2 years now instead of 5. I don't want to miss the boat so to speak. Of course this is a gamble.