Repayment of Help to Buy Loan

dothenumbersaddup

Hello, I am looking to repay my help to buy loan as it reaches the 5 year point.  My reasoning is that the initial effective interest rate would be 1.75% plus house price inflation which is in the order of 4%, so 5.75% which is higher than the savings interest rate I can expect.  Wondered if other members could advise their viewpoint so I get a rounded view. Also I am keen to keep costs down for fees, and to ensure the valuation is not overstated, and wondered if anyone had advice on this.

MattMattMattUK

Do you have a mortgage, or have you paid that off?

dothenumbersaddup

Hi Matt, figures may help - house  bought 5 years ago, 217k, HTB 45k mortgage 80k,  now worth circa 265k, so HTB 53k, mortgage 77k. Mortgage rate circ 4%. Funding coming from parental gift to repay HTB.

Hoenir

After 5 years, i,e, in year 6. The rate of interest you pay will increase. So 1.75% by the rise in the Retail Price Index (RPI) plus 1% .

If RPI is 3% annually for example.  

Year 6 - 1.75% increasing by 3% = 1.80% plus 1% = 2.80%

Year 7 - 2.80% increasing by 3% = 2.89% plus 1% = 3.89%

Year 9 - 3.89% increasing by 3% = 4.00% plus 1% = 5.00%

Valuation will need to be independantly performed. The 20% of the selling price being the pay back for the interest free loan.