new build homes

[uncle_rufus]

Could be a monthly figure? Worth noting that RPI +1% figure of 6% that was used is very likely to be higher than what you would actually pay as average RPI for the last 20 years is 2.55% with it maxing out at 4.1% in in 2010 & 2011. Still better to look at a likely worst case scenario (obviously it could go far higher, it hit 25% in 1975) to make sure you are not over extending.

Okay so just checking - supposing RPI is 2.55% then in year 6 that would make the interest on the equity loan 2.5755%?

Edit: No I'm completely wrong I just looked it up XD It's 1.75% plus (inflation + 1%) as you quoted above - apologies for not checking my facts!

In terms of scenarios I think the fact that we'd already be borrowing something like £20k less than the limit of what we could technically borrow should mean that depending on the state of things after the 5 years are up it wouldn't be too unreasonable to expect that we could re-mortgage to absorb a decent chunk of the equity loan if it looked like that would make the most financial sense... Assuming that we are also able to save a little during those 5 years as well (I mean at the very least we can save the difference between our current rent and the mortgage payments) then I feel like its not a completely ridiculous deal... Or am I being silly?

 

[Del Lardo]

In terms of scenarios I think the fact that we'd already be borrowing something like £20k less than the limit of what we could technically borrow should mean that depending on the state of things after the 5 years are up it wouldn't be too unreasonable to expect that we could re-mortgage to absorb a decent chunk of the equity loan if it looked like that would make the most financial sense... Assuming that we are also able to save a little during those 5 years as well (I mean at the very least we can save the difference between our current rent and the mortgage payments) then I feel like its not a completely ridiculous deal... Or am I being silly?

That's a decision that only you can make, and you really need to run the figures. For us that wasn't something that we wanted to do but it's certainly something that other people plan on doing.

Mortgage Schedule Calculator is very useful to show you how much equity you will have paid off after 5 years, bearing in mind that at the start it is mostly interest you are paying it may be less than you expect. IIRC the equity paid off after 5 years is only about half the Help to Buy Loan so you are relying on wage increases or increased house value to help you remortgage the whole lot.

We made the decision to aim to pay off the loan within 4 years by saving, this also has the advantage of covering us should interest rates shoot up and in 3 years time when our fixed rate runs out we are looking for a new Mortgage with a rate of 5-6% instead of 2%, something that is certainly worth considering should you be tight on monthly repayments. The Mortgage calculator I linked to above is very good for playing around with to get an idea of how much money you may have to find for mortgage payments should (some would say when) interest rates go back up.