Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • JasperKnight
    • By JasperKnight 16th May 19, 9:34 PM
    • 1Posts
    • 0Thanks
    JasperKnight
    H2B - Am I missing something?
    • #1
    • 16th May 19, 9:34 PM
    H2B - Am I missing something? 16th May 19 at 9:34 PM
    Hello,

    Just a quick question really as I'm not sure if I'm missing anything.

    I have a mortgage and a H2B equity loan. Currently 2 years in, so another 3 years before the interest starts on the equity loan which is fine.

    My understanding is that at the end of the 5 year period is that I have 4 options:

    1. Pay the loan back at the prevailing 20% rate
    2. Pay the interest to the Government
    3. Re-mortgage the equity loan into a standard mortgage, presumably with the main mortgage
    4. Sell the house and pay the equity loan back

    Assume option 1 and 4 are off the table.

    I have 2 options left, pay the interest or re-mortgage.

    My question is, if the interest in year 6 and 7 is 1.75% and 1.86% respectively (appreciate it's based on RPI at the time so not necessarily 100% accurate) why would anyone re-mortgage? These interest rates at lower than what most banks are offering (right now). To me it makes complete sense to wait until the interest rate on the H2B equity loan is higher than what you could get from a bank (at least year 8 under current circumstances), before considering re-mortgaging.

    I know people who are talking about re-mortgaging as soon as their 5 year period ends and I just do not understand why if the interest rate to the Government is less than what a bank will offer them - is my understanding wrong?

    TIA.

    Edit: also putting aside the potential benefit of the house value soaring in Y6 & Y7 and not owing the Government the additional 20% on the increased value.
    Last edited by JasperKnight; 16-05-2019 at 9:45 PM.
Page 1
    • aries_163
    • By aries_163 16th May 19, 10:02 PM
    • 56 Posts
    • 45 Thanks
    aries_163
    • #2
    • 16th May 19, 10:02 PM
    • #2
    • 16th May 19, 10:02 PM
    As I understand it, the is only a small pool of lenders who offer remortgage options with the HTB equity loan still in place. So although the interest rate on the initial fix could be at a good rate, the owner could be stuck on a higher SVR after the initial fix ends, resulting in higher monthly mortgage payments. It might be worth consolidating the loan into the mortgage if the overall monthly payment decreases vs the SVR payment?
    I’m no expert however, and the amount of lenders offering HTB remortgage options may have increased since I last looked into it. But this could be one reason people would consider it.
    • amnblog
    • By amnblog 16th May 19, 10:21 PM
    • 11,050 Posts
    • 4,408 Thanks
    amnblog
    • #3
    • 16th May 19, 10:21 PM
    • #3
    • 16th May 19, 10:21 PM
    You need to think about where the value of the property is going.

    Since you buy the equity loan out at the prevailing value there is little point in buying out the equity share when values are falling. If values are rising your cost of buy out is rising making early buy out more valuable.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • Vampgirl
    • By Vampgirl 17th May 19, 8:17 AM
    • 596 Posts
    • 429 Thanks
    Vampgirl
    • #4
    • 17th May 19, 8:17 AM
    • #4
    • 17th May 19, 8:17 AM
    if the interest in year 6 and 7 is 1.75% and 1.86% respectively (appreciate it's based on RPI at the time so not necessarily 100% accurate) why would anyone re-mortgage? These interest rates at lower than what most banks are offering (right now)
    You need to think about where the value of the property is going.
    This!

    We are facing this exact decision right now. Yes it would be cheaper from a monthly repayment point of view to just pay the interest on the equity loan, but we live in an area of strong house prices which are more likely to rise than fall so it makes sense for us to pay it off asap. Our house has already gone up around 20% in the past 4.5 years - which means we owe the government 16k more than we initially borrowed.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,222Posts Today

6,316Users online

Martin's Twitter