Govt help to buy loan. In current climate should I pay it off?

arnie2016

Hi all. Was dead set on repaying it this yr and somebody just made a very gd point that I should rethink n weigh up the interest on it Vs paying off and house prices. He doesn't believe I should and rather pay the mortgage down asuch as I can for now as that's higher Vs property price increase and the loan interest.

More I think about it more I get confused now do I work all this out to ensure I'm doing the best thing my current mortgage rate is 4%

I'm in year 7 of help to buy loan if that helps

MattMattMattUK

arnie2016 said:

Hi all. Was dead set on repaying it this yr and somebody just made a very gd point that I should rethink n weigh up the interest on it Vs paying off and house prices. He doesn't believe I should and rather pay the mortgage down asuch as I can for now as that's higher Vs property price increase and the loan interest.

More I think about it more I get confused now do I work all this out to ensure I'm doing the best thing my current mortgage rate is 4%

I'm in year 7 of help to buy loan if that helps

What is the current interest rate on your HTB loan?

arnie2016

im not sure exactly how to work it out buts its £600 a year, £50 a month and im in year 7.

i took out 33k if that helps

arnie2016

thinking about it, isnt that like 2%?

The interest rate increases every year in April, by adding the Consumer Price Index (CPI) plus 2%

arnie2016

found an online calculator which looks accurate as the year 6 was exactly this and year 7.

inflation rate of 2.6 used

Year	Interest Rate	Total per month	Total per year
6	1.75%	£49.85	£598.25
7	1.82%	£51.81	£621.7
8	1.89%	£53.84	£646.09
9	1.97%	£55.95	£671.45
10	2.05%	£58.15	£697.83
11	2.13%	£60.44	£725.26
12	2.21%	£62.82	£753.79
13	2.30%	£65.29	£783.47
14	2.39%	£67.86	£814.32
15	2.49%	£70.54	£846.42
16	2.59%	£73.32	£879.79
17	2.69%	£76.21	£914.5
18	2.80%	£79.22	£950.61
19	2.91%	£82.35	£988.15
20	3.03%	£85.6	£1027.2

amnblog

It is costing you 2% to maintain your H2B Loan, if you replace it with mortgage lending it will cost around 4%, doubling your cost - so why do it?

If the property price is increasing, the sooner you buy out the equity loan the less it will cost you to do so. A price increase over 2% a year makes it better to buy the loan out.

No price increase or price drop and there is no value in buying the equity loan out.

In effect, the H2B Team are currently picking up 20% of the risk of property value drops, but getting 20% of the benefit of property value rises.