Help to Buy LTV Help

NYA2017 · 7 April 2018 at 10:18PM

Hi everyone,

I was just wondering if anyone knows the answer to my question. I'm wanting to remortgage to pay off my Help to Buy equity loan at some point in the future, and I'm aware that you need a certain LTV to be able to do it. However, do mortgage lenders calculate LTV based on the 80% equity of the house you own or the full market value of the house?

Thanks in advance!

dimbo61 · 7 April 2018 at 10:44PM

So you put down a 5 percent deposit on a new build property ?
You took an interest free loan of 5 years from the government which was 20 percent of the value of the property when you first bought it !
You also borrowed money from a mortgage lender for the other 75 percent.
Now after 5 years you can either remortgage to a different lender or see if you current lender can offer you a new deal.
Question 1 Is your property worth more or less than you paid for it ?
Question 2 How much do you owe on the mortgage ?
Question 3 How much is your home now worth ?
Can you overpay each month or do you have any savings to pay down the mortgage or pay a lump sum off the balance.

dimbo61 · 7 April 2018 at 10:48PM

Unless you live in London and have a 40 percent HTB loan off course ?

NYA2017 · 7 April 2018 at 10:57PM

Hello,

No I'm outside London. But we actually put down a little more than 5% for our deposit. So we have the 20% loan but a slightly smaller mortgage. On our Natwest app is says that the LTV is 69%, so that obviously takes into account tthe full market value (it's quite low because if our deposit). But I was just wondered if we remortgaged would they use that LTV or would they calculate it minus the 20% loan value?

I'm not sure if that makes sense or not.

NYA2017 · 7 April 2018 at 10:58PM

Ignore the typos, I'm terrible at typing on this phone!

Nebulous2 · 8 April 2018 at 7:06AM

You need to answer the questions above -as this maybe complicated, depending on the figures.

However LTV will be the based on the valuation the lender gets done and the mortgage you ask for. So if the house is valued at £100k and you borrow £80k then it will be 80% LTV.

kingstreet · 8 April 2018 at 9:46AM

Technically, you already own 100% of the property with a second charge securing a loan over the 20%.

A new lender will take the current value and the total amount you need to borrow to repay your existing mortgage and the HTB loan will generate the LTV.

This is a debt consolidation scenario, so many lenders won't lend more than 80% of the current value but one or two will go as high as 90%. Get broker help.

dimbo61 · 8 April 2018 at 11:02AM

If you read the terms and conditions of Help to Buy it's Win Win for the government and builders of new homes.
You are given a 20 percent loan which you start to pay interest on after 5 years but you have to pay back 20 percent of the properties value if you want to clear the loan.
So if you home is say £200,000 when you buy it and you get a 20 percent HTB loan of £40,000 you need to pay back 20 percent of its value after 5 years.
Say your home is now worth £250,000 you have to repay £50,000.
It does not work the other way ! If your home is worth £180,000 after 5 years you still have to repay £40,000.
New builds tend to lose money in the first few years unless you have a rising housing market or huge demand for your type of property and limited availability.
Forget the Natwest app as it is showing the mortgage outstanding against the property value while ignoring the 20 percent HTB loan.

kingstreet · 8 April 2018 at 1:29PM

dimbo61 wrote: »

It does not work the other way ! If your home is worth £180,000 after 5 years you still have to repay £40,000

This is not the case. If the property value falls, the amount repayable falls too.

From page 17 of the HTB Buyer's Guide;-

"This means if the market value of your property falls below the level at which it was first purchased, you will repay less than the original amount Homes England contributed to the original purchase."

https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdf

dimbo61 · 8 April 2018 at 3:53PM

Sorry Kingstreet I stand corrected.
However I am deeply concerned about HTB with many buyers of new builds facing a big increase in mortgage and HTB loan payments after 5 years while having sometimes 95-100 percent LTV

NYA2017 · 8 April 2018 at 5:30PM

"Forget the Natwest app as it is showing the mortgage outstanding against the property value while ignoring the 20 percent HTB loan."

This is the kind of thing I'm asking. If I wanted to borrow more, would my LTV be calculated on the 80% of the equity I own or the 100% market value? I'm assuming that if I were to apply for more lending to pay off the loan, the banks would calculate it using the full market value.

This isn't really a question about HTB but how banks calculate LTV. I understand people's concerns about the loans but I am not one of them and am fully aware of the T&Cs, hence why I applied for the loan.

Help to Buy LTV Help

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free