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    • NYA2017
    • By NYA2017 7th Apr 18, 10:18 PM
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    NYA2017
    Help to Buy LTV Help
    • #1
    • 7th Apr 18, 10:18 PM
    Help to Buy LTV Help 7th Apr 18 at 10:18 PM
    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!
Page 1
    • dimbo61
    • By dimbo61 7th Apr 18, 10:44 PM
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    dimbo61
    • #2
    • 7th Apr 18, 10:44 PM
    • #2
    • 7th Apr 18, 10:44 PM
    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
    • By dimbo61 7th Apr 18, 10:48 PM
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    dimbo61
    • #3
    • 7th Apr 18, 10:48 PM
    • #3
    • 7th Apr 18, 10:48 PM
    Unless you live in London and have a 40 percent HTB loan off course ?
    • NYA2017
    • By NYA2017 7th Apr 18, 10:57 PM
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    NYA2017
    • #4
    • 7th Apr 18, 10:57 PM
    • #4
    • 7th Apr 18, 10:57 PM
    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
    • By NYA2017 7th Apr 18, 10:58 PM
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    NYA2017
    • #5
    • 7th Apr 18, 10:58 PM
    • #5
    • 7th Apr 18, 10:58 PM
    Ignore the typos, I'm terrible at typing on this phone!
    • Nebulous2
    • By Nebulous2 8th Apr 18, 7:06 AM
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    Nebulous2
    • #6
    • 8th Apr 18, 7:06 AM
    • #6
    • 8th Apr 18, 7:06 AM
    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
    • By kingstreet 8th Apr 18, 9:46 AM
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    kingstreet
    • #7
    • 8th Apr 18, 9:46 AM
    • #7
    • 8th Apr 18, 9:46 AM
    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.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • dimbo61
    • By dimbo61 8th Apr 18, 11:02 AM
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    dimbo61
    • #8
    • 8th Apr 18, 11:02 AM
    • #8
    • 8th Apr 18, 11:02 AM
    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
    • By kingstreet 8th Apr 18, 1:29 PM
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    kingstreet
    • #9
    • 8th Apr 18, 1:29 PM
    • #9
    • 8th Apr 18, 1:29 PM
    It does not work the other way ! If your home is worth 180,000 after 5 years you still have to repay 40,000
    Originally posted by dimbo61
    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
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • dimbo61
    • By dimbo61 8th Apr 18, 3:53 PM
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    dimbo61
    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
    • By NYA2017 8th Apr 18, 5:30 PM
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    NYA2017
    "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.
    • dimbo61
    • By dimbo61 8th Apr 18, 8:12 PM
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    dimbo61
    Any lender will calculate the LTV on the value of the property against the outstanding debts on the property.
    • NYA2017
    • By NYA2017 13th Apr 18, 11:35 PM
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    NYA2017
    If anyone's interested, I got in touch with Halifax and they said that they calculate LTV at full market price value, and that to pay off HTB you can borrow up to 85% of the property's value. All lenders are different, but this is good news to what I was asking as they don't base it on the 80% equity you own but full 100%.
    • Grezz24
    • By Grezz24 16th Apr 18, 10:50 AM
    • 123 Posts
    • 76 Thanks
    Grezz24
    you always own 100% of the home in a help to buy scenario. you just take a loan from the govt which you have to pay back at 20% of the property value
    • getmore4less
    • By getmore4less 16th Apr 18, 12:20 PM
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    getmore4less
    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
    Originally posted by dimbo61

    Worst case it is a deferred 1.75% interest interest only on the original 20% loan

    This will already be lower than the 75% LTV rate they got in the first place.

    if Interest rates go up its going to look even better.


    It would have been easy to built this in if they could.
    Take the mortgage over a longer term and overpay by at least the amount needed to cover the interest in 5 years.

    In the often example used 200k 150k mortgage, 10k deposit, 40k HTB

    40k @ 1.75% is just under 60pm

    150k over 25y @ 2% 636
    150k over 30y @ 2% 555

    Along with the savings from the better HTB rate there is plenty in the pot to overpay and not come unstuck in 5 years.

    If the house has gone up then that 1.75% on the original loan is going to look VERY cheap against trying to capitalize it into the mortgage at current value.
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