HTB i'm concerned

bmbm365

Hi,

Have I got this correct? My 5 year anniversary is October. 

So as I understand it I will be paying 1.75% + RPI +2%. Which is 12%+ in total? 

Also i believe my house price value has gone up significantly- so when i value my property at the time of repayment it will be larger than the initial loan I took out.

Anyway not only am I concerned about how much i'll be paying in £ terms. I am also concerned that the government is making significantly more money out of me than my bank! Even at a variable rate.

Have I got this totally wrong? or is the government making more money than the bank?

It seems to me i'd be better off re-mortgaging if i can, pay off the HTB scheme early and owe the bank more money as they seem to be at least fairly and rationally pricing given the circumstances! 

COYI123

bmbm365 said:

Hi,

Have I got this correct? My 5 year anniversary is October. 

So as I understand it I will be paying 1.75% + RPI +2%. Which is 12%+ in total? 

Also i believe my house price value has gone up significantly- so when i value my property at the time of repayment it will be larger than the initial loan I took out.

Anyway not only am I concerned about how much i'll be paying in £ terms. I am also concerned that the government is making significantly more money out of me than my bank! Even at a variable rate.

Have I got this totally wrong? or is the government making more money than the bank?

It seems to me i'd be better off re-mortgaging if i can, pay off the HTB scheme early and owe the bank more money as they seem to be at least fairly and rationally pricing given the circumstances! 

I’m way to stoned to understand what you just said , but I hope you resolve you’re issue peace out my man 

mrsplinter

bmbm365 said:

Hi,

Have I got this correct? My 5 year anniversary is October. 

So as I understand it I will be paying 1.75% + RPI +2%. Which is 12%+ in total? 

Also i believe my house price value has gone up significantly- so when i value my property at the time of repayment it will be larger than the initial loan I took out.

Anyway not only am I concerned about how much i'll be paying in £ terms. I am also concerned that the government is making significantly more money out of me than my bank! Even at a variable rate.

Have I got this totally wrong? or is the government making more money than the bank?

It seems to me i'd be better off re-mortgaging if i can, pay off the HTB scheme early and owe the bank more money as they seem to be at least fairly and rationally pricing given the circumstances! 

I think the Help to Buy info is a bit confusing and you've misunderstood. 1.75% is a fee/interest rate paid in year six. In year 7 the fee goes up by the rate of inflation plus 2%. So if the RPI is 10%, the fee must go up by 12%. Increase 1.75% by 12% and you arrive at 1.96% as the figure for year 7. If the same RPI the next year the fee goes up 12% from 1.96% to 2.2 and so on.

silvercar

You’ve got your figures wrong.

after 5 years you pay interest at 1.75%. Each year this then increases according to the following:
“The interest rate increases every year in April, by adding the Consumer Price Index (CPI) plus 2%. If you bought your home with the earlier Help to Buy: Equity Loan (2013-2021) scheme, the interest rate increases by adding the Retail Price Index (RPI) plus 1%.“

So the following year if the RPI was say 9%. The interest rate increases by 9+1=10%. This means the 1.75% increases by 10% to 1.925%.

so the HTB is on a rate probably lower than you could obtain elsewhere.

bmbm365

Thank you all. Makes much more sense. My only outlying question is if this October is my 5 year anniversary, at what period will i start being charged a fee? From October this year, April next year, or October next year? Also they value your house and you are charged accordingly- what happens if i dont get my house valued, how do they know how much to charge me?

SandyShores

Thank you for asking this question, the responses are really useful to help me understand what we'll be paying.  I don't know for sure when the interest is charged, but the H2B pages on gov.uk say that the interest is charged monthly in year 6, so I'm assuming it will kick in at five years and one month. You only pay the interest on the original amount until you need to have a valuation.

When you want to move house or remortgage, you will pay for a valuation at that point.  I found the following useful on the Home Owners Alliance website about remortgaging H2B (and there's a good example of the interest calculations on the second link):

Can I remortgage a Help to Buy home?

After the interest-free five-year period, you may want to remortgage and either keep the equity loan from the government, or use a new mortgage to repay the Help to Buy loan. The latter option will increase the size of your standard mortgage but you’ll find more lenders and options available to you. For more advice on remortgaging your Help to Buy equity loan, see our guide on How to remortgage your Help to Buy.

Some homeowners will choose to remortgage and repay the equity loan because it means they will benefit from any increase in value – but they should beware that it may mean the monthly mortgage repayments go up.

What you should know about remortgaging with a Help to Buy equity loan:

• If you want to remortgage, you’ll need to pay a £115 administration fee to Homes England.
• Homes England’s Mortgage Administrator will need to approve any increase in your first charge mortgage.
• When paying back the equity loan, either through staircasing or when you come to sell your home, the sum you owe will depend on the most recent valuation of the property.
• Also not all lenders offer mortgages on Help to Buy homes. If you want to remortgage to get a better deal, while keeping the Help to Buy equity loan, you’ll find a much smaller range of products available to you.

silvercar

bmbm365 said:

Thank you all. Makes much more sense. My only outlying question is if this October is my 5 year anniversary, at what period will i start being charged a fee? From October this year, April next year, or October next year? Also they value your house and you are charged accordingly- what happens if i dont get my house valued, how do they know how much to charge me?

You only pay interest on the original HTB amount, you start to pay it monthly after the 5 year anniversary. Think of it as an extra mortgage repayment.

snowqueen555

A few people I know have re-mortgaged after 5 years to clear the loan, I'm not sure if that is an option for you.

chanz4

Personally we had it up until oct last year, took out in 2013 and tbh cheaper paying intrest than the mortgage rate

marmitesocks

Just to be aware, there is a major issue for anyone trying to make changes/exit HTB at the moment:

https://forums.moneysavingexpert.com/discussion/6455729/help-to-buy-not-answering-phone/p1