Any help to buy customers paid off the loan or added it to mortgage yet?

[kinger8938]

We are coming up to a point where I can remortgage to secure a better rate. I'll try and keep it short.

So Help to buy is interest free for 5 years. Our original mortgage was fixed for 2, looked into it then but we needed costs down as we had just had our son so we fixed for 2 more years at a much better rate.

That is now coming to an end. So it's 4 years in, we still have 1 year interest free left on the Help to buy loan so trying to decide what's the best course if action.

In a way it seems silly to add it before the interest free is up as why pay interest on a sum if you don't have to yet? But on the other hand, the house value has gone up a fair bit over our time here meaning we need to pay back more that we originally borrowed and it could continue to rise though I can't see it changing too much now, though I'm no expert.

One other reason to maybe just fix again and leave it for now is the expense. No one told us of all the fees related to remortgaging if adding in the Help to buy loan. You need a special valuation which is £300-500 on top of legal fees and so on so looking at around £1000-1500 upfront.

If I fix for 2 more years, after 1 year I'll start paying interest on the HTB loan so it's just poorly timed unfortunatly. I guess I could then over pay bringing the loan amount down as much as possible over these next 2 years making for an easier remortgage next time?

I've sort of waffled on here just wondering what others think of the situation or if anyone can talk from experiance on the subject.

**edit

Also, does it look bad to constantly remortgage? Just seems weird to constantly be jumping around but I guess it's sort of normal early on or with this way of buying?

 

[MatteH Oxford]

I would seek profession advice, by the looks of things mainstream lenders are avoiding HTB remortgages: https://www.ft.com/content/f2de7e0c-94d4-11e8-b747-fb1e803ee64e

First-time buyers who used the government’s Help to Buy scheme to get on the property ladder are now finding they need help to remortgage, as many major lenders refuse to offer them finance.

Under its flagship home ownership scheme launched in 2013, the government offered borrowers an equity loan of up to 20 per cent of the value of a new-build home, rising to 40 per cent in London. These loans are interest free for the first five years. Following that period borrowers must then pay interest of 1.75 per cent, increasing by RPI plus 1 per cent, on top of their normal mortgage repayments.

Only eight out of 25 lenders said they would offer remortgages to new customers who had yet to pay off their government loans, according to figures provided to the Financial Times by Homes England, the housing regulator. This could leave buyers and “second steppers” who used the Help to Buy scheme facing reduced choice and higher fees when they come to remortgage.

Nationwide, NatWest, RBS and Santander are among the large lenders who do not offer a remortgaging option to new borrowers who have yet to repay the government’s equity loan..

 

[kinger8938]

I would seek profession advice, by the looks of things mainstream lenders are avoiding HTB remortgages: https://www.ft.com/content/f2de7e0c-94d4-11e8-b747-fb1e803ee64e

Thanks, I have since contacted my original advisor and are looking at a few options currently. I think due to the fees I will need to just fix down again and sort the HTB loan out next time, hope to move in the coming year or so and maybe with that this could be easier to resolve.

 

[Slam62]

All depends what your ltv is

 

[Spammeh]

The maths is pretty simple for this, although like everything house/mortgage wise it is a gamble. I can say this, because I too had a HTB mortgage

So if you think the additional interest you will have on top of your mortgage should you pay off your HTB and add it to your loan, will be less than the additional payments you'll have to make if you don't pay it off, then your decision is made.

For me, in the first 2 years of our HTB, our house increased by £30k, up to a value of £240k. Meaning out HTB loan just went up by £6k (20%). If we didn't pay it off at the earliest opportunity, and with this type of mortgage, interest rates weren't exactly favourable. We were worried that by the end of 5yrs, we could potentially owe the government (now Target), almost £15k, something that would be far less in our situation if we paid it off, and got 'traditional' mortgage with lower interest rates.

That was a year ago for us, and we've not looked back.

 

[MatteH Oxford]

It appears you loose out both ways, if prices rise you have to find more money to cover the increase on the 20% and if prices fall you get clobbered with a rubbish interest rate due to remortgage difficulties.

 

[rah^]

The maths is pretty simple for this, although like everything house/mortgage wise it is a gamble. I can say this, because I too had a HTB mortgage

So if you think the additional interest you will have on top of your mortgage should you pay off your HTB and add it to your loan, will be less than the additional payments you'll have to make if you don't pay it off, then your decision is made.

For me, in the first 2 years of our HTB, our house increased by £30k, up to a value of £240k. Meaning out HTB loan just went up by £6k (20%). If we didn't pay it off at the earliest opportunity, and with this type of mortgage, interest rates weren't exactly favourable. We were worried that by the end of 5yrs, we could potentially owe the government (now Target), almost £15k, something that would be far less in our situation if we paid it off, and got 'traditional' mortgage with lower interest rates.

That was a year ago for us, and we've not looked back.

A good mortgage adviser got rid of my first help 2 buy loan after only a few years

The good part is Target rely on the value from an independent RICS valuation so it could come in 5/10% less than what the bank value the property at for mortgage purposes (this is what happened with my flat) making remortgaging very easy on that front

 

[HangTime]

It appears you loose out both ways, if prices rise you have to find more money to cover the increase on the 20% and if prices fall you get clobbered with a rubbish interest rate due to remortgage difficulties.

Glass half full people would argue you win both ways; if prices rise your increase in equity value massively outweighs the increase in HTB debt, if prices fall then your HTB debt falls also.

 

[MatteH Oxford]

Glass half full people would argue you win both ways; if prices rise your increase in equity value massively outweighs the increase in HTB debt, if prices fall then your HTB debt falls also.

Most people only look at their monthly payments and both scenarios would increase them from the look of the news report.

The general financial situation a person would find themselves in if the mortgage was in negative equity far outweighs the supposed benefit of a lower HB debt. Can't move, can't remortgage unless the amount borrowed is lower than the property value. With HTB a mortgage holder is effectively 20% underwater from the moment they buy!

Even if an increase in a particular properties' value lead to a cheaper mortgage via better LTV, that advantage is lost buying a bigger property as they have often increased in value more i.e. the gaps on the ladder have got bigger as a result.

 

[HangTime]

With HTB a mortgage holder is effectively 20% underwater from the moment they buy!

Depends on the size of their deposit. I don't think negative equity should be considered as a problem exclusive to HTB - if people are going to be in a position where they can't remortgage due to owing more than the property is worth, there's a fair chance they could have been in that situation anyway. If they are reliant on a booming housing market to ensure they can repay their equity loan after 5yrs then that's more a case of them being heavy risk takers than a problem with product itself in my eyes.

Don't forget that a traditional lender doesn't knock money off your mortgage if the price goes down, better to borrow say 20% HTB 30% mortgage than 50% mortgage in that scenario, even ignoring the interest savings over 5 years. IMO HTB arguably makes more sense in a falling market than a rising one, because you suffer less of the pain in a falling market and get less of the benefit in a rising one. It's effectively a loan with a negative interest rate if your property value decreases over the first 5yrs.

Even if an increase in a particular properties' value lead to a cheaper mortgage via better LTV, that advantage is lost buying a bigger property as they have often increased in value more i.e. the gaps on the ladder have got bigger as a result.

If an increasing market is deemed as bad because it means moving up the ladder is more expensive, then we must also acknowledge that in a falling market that means moving up the ladder is cheaper. Don't forget that potentially HTB may have got them higher up the ladder to begin with, so they could have had the benefit of living in a superior property for the past 5yrs compared to having not taken out the loan. Especially somewhere like London where you can get 40% equity loan, basically £240k interest free (and money you might not otherwise have been able to access via traditional means) for 5years, that makes a real difference to the quality of living over 5 years (I accept that you don't get the full £240k benefit as potentially not as good a mortgage product as open market, and that type of scenario puts them into the risk taker category I mentioned above, but still...)

 

[kinger8938]

Thanks guys sorry I didn't realise I had more replies here.

Unfortunatly in my current situation I hadn't realised paying off or adding the HTB to a mortgage came with the upfront costs that it does including needing a RIX and legal fees and I don't really have that to spare right now so I have decided to fix down for 2 more years at a better rate and just make over payments to at least match what I currently pay (as the monthly would go down by a fair bit) and then some. This will then (hopefully) result in us needing to essentially borrow less next time round etc as the value of our Loan will be lower than it is now and so on.

Probably my bad but they really should have let us know how much doing this would cost at the start. Maybe they did but pretty sure they didnt and even if they did many as first time buyers are just excited to have their home and aren't yet worried about what happens 5 years down the line. It comes round damn fast

Either way we don't own interest for another year and a bit yet

 

[Kemik]

I remortgaged and bought out my help to buy. Simple valuation performed with only a tiny bit more legal fees than a standard remortgage. Everything went swimmingly considering the Government made a ton of money from it.

Though, you should have spoke to your mortgage advisor at the time for how to exit the Help to Buy if you are now concerned about fees. You should understand the process this major through and through wherever possible. A lesson for the future maybe?

 

[kinger8938]

I remortgaged and bought out my help to buy. Simple valuation performed with only a tiny bit more legal fees than a standard remortgage. Everything went swimmingly considering the Government made a ton of money from it.

Though, you should have spoke to your mortgage advisor at the time for how to exit the Help to Buy if you are now concerned about fees. You should understand the process this major through and through wherever possible. A lesson for the future maybe?

Oh I agree that I wasn't aware of what was involved and I don't think many first time buyers are. It was made out to be a simple case of just remortgaging to include the help to buy balance when the time came, but this was very vague. No mention of RIKS valuations and lawyer fees at the time of purchase. It's almost like they just wanted to sell the new house and move on to the next buyer

I learnt from the help to buy process early on to then ask about fees and stuff in the future. Even when we bought the place I specifically asked for all the fees to be laid out so we knew what to expect, and low and behold we were hit by something else that wasn't mentioned. Was a while back I can't really recall what it was

Either way, 4 years in I now know what's involved with merging the help to buy into the mortgage, so when it comes round again we should be better prepared, I guess the main aim though is to encourage you to maybe sell up, pay off and potentially move up the ladder.

However if we were to do that we wouldn't really move up, but we are thinking about it as we may find a non-new build property with more to offer while still within our range of what we can borrow etc. We shall see

 

[fastwunz]

I did HTB. Remortgaged two years in and my LTV went into a better bracket given the rise in value of my place. Saved a fortune.

I have never had any issues with remortgaging and I use NatWest.

 

[kinger8938]

I did HTB. Remortgaged two years in and my LTV went into a better bracket given the rise in value of my place. Saved a fortune.

I have never had any issues with remortgaging and I use NatWest.

Nice sounds like you are in a good place now then!

I wanted to do it 2 years in but we were just about to have our son and it was just bad timing, so had to keep the monthly down while partner was on maternity really. We are with Halifax, not complaining about them, no issues so far in that regard. Will keep Natwest in mind for next time as many lenders aren't interested in taking on the HTB in some cases

 

[Psycho Sonny]

It appears you loose out both ways, if prices rise you have to find more money to cover the increase on the 20% and if prices fall you get clobbered with a rubbish interest rate due to remortgage difficulties.

What a load of rubbish.

If house increases so has the 80% you didn't take the loan on.

So it's nowhere bear the lose/lose you are making it out to be.

People only ever look at it as glass half empty for some reason.

 

[kinger8938]

What a load of rubbish.

If house increases so has the 80% you didn't take the loan on.

So it's nowhere bear the lose/lose you are making it out to be.

People only ever look at it as glass half empty for some reason.

Yeah very true. I think it just hurts to think that they are getting more too but it's all relevant imo

 

[Psycho Sonny]

Yeah very true. I think it just hurts to think that they are getting more too but it's all relevant imo

They aren't getting more. They are getting what was agreed. You take a loan because you don't have the cash at hand. Obviously there has to be something in it for the creditor.

 

[kinger8938]

They aren't getting more. They are getting what was agreed. You take a loan because you don't have the cash at hand. Obviously there has to be something in it for the creditor.

**post before, was supposed to say " it's all relative" stupid phone spell checking

I'm not saying it wasn't what was agreed, I'm just agreeing that in terms of the actual money, they are getting more than they put in at the start as obvious as that is and on the other side we as the owner would be getting more too (assuming house value increased which in many cases it has done). 20% is 20% at the end of the day

 

[NoobCannon]

I dont understand why the goverment gave up on this scheme its an almost guaranteed money maker for them

Just sold my help to buy flat. Original loan from goverment of 30k 4 years ago and ive just paid them 47k.