What's the best option?!

Raebean

My situation is a little niche, essentially our fixed rate ends this year. 

We have 2 options - go ahead with a remortgage to borrow more to buy out our help to buy, but requires indemnity insurance or deed of variation due to a sneaky rentcharge. 

Our concerns with this option are:
-buying out htb with house values likely to fall
-the added stress of the rent charge

Option 2 is to fix a new rate with current lender and not borrow more.

Our concern with this one
-htb interest rates kick in

We really don't know what to do for the best. Any advice welcome.

kingstreet

HTB interest in the next few years is likely to be well below market rates. The existing lender PT and retain the HTB loan for now is likely to be the most cost-effective option if your property value is stagnant/falling.

Raebean

We did think it didn't make sense to buy htb out now as house prices are forecast to fall, especially at the higher interest rates.

Though the broker we spoke to said the htb second year (or 7th technically):interest rates become variable. Not sure if that's correct.

amnblog

Raebean said:

Though the broker we spoke to said the htb second year (or 7th technically):interest rates become variable. Not sure if that's correct.

HTB payments are variable in that they rise annual in line with retail prices plus 1%.

RPI is currently 8.9%.

At that RPI you would pay 1.75% in year 6 and 1.92% in year 7

(8.9% + 1% = 9.9%     1.75% increased by 9.9% = 1.92%)

If RPI stayed as is, costs versus a mortgage (on say 5.50% rate) would be:

Year	HTB Loan	HTB Interest	HTB Payments	Mortgage Interest
6	£40,000	1.75%	£58.33	£183.33
7	£40,000	1.92%	£64.11	£183.33
8	£40,000	2.11%	£70.46	£183.33
9	£40,000	2.32%	£77.43	£183.33
10	£40,000	2.55%	£85.10	£183.33

dimbo61

Somewhat lacking in information  ?
London 40% HTB loan or 20% outside London ?
What is the LTV now for the 80% you own minus the current mortgage ?
What remortgage rates are you looking at ? 
Can you afford to buy the other 20% loan ?
Long term plans  ? Kids ? Bigger home ? Income, job career etc 
Lots to consider 
If you carry on with the current arrangement you will more than likely  pay a higher mortgage payment each month and start paying interest on the HTB Loan ( even at a low rate )

Raebean

Outside London 20% htb. I can never remember what ltv is tbh. Too much jargon for a simpleton like me. 

We can only afford to borrow more by extending the mortgage from 25 year to 35 or something stupid. It feels as though we will be paying more whilst paying off less of the actual mortgage to do that. 

We were also told if we go with a new lenders without paying off htb, it has to be same term, so 25 years which isn't affordable for us. 

I'm more and more drawn to staying with lender for 2 more years, pay interest on htb and then we'd probably look to sell and move anyway.