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Original poster

End of mortgage term September and due to pay off help to buy…!

34 replies

BlueMumma2018 · 20/06/2023 21:16

Hi,

we bought our house in 2018 with help to buy putting in 5%. Our current mortgage deal is due to end in September and was at 0.25. Our repayments are £590. We have just come to the end of our interest free help to buy loan term also and due to pay it back otherwise start paying interest. We have been quoted the best deal we can get is around 6% also adding in paying off help to buy and our repayments will be just shy of £1400!!

I am so anxious about this as it means we are quite f*cked.

im just wondering if anyone can give advice on this. OH is set on doing this but I’m wondering if we would be better off leaving help to buy for another couple of years and suffer the interest on it because the internet is outrageous. If we were doing this at the same rate we were on it would only be £750 odd. I get it that we had record interest lows but to pay over double per month is a joke. It’s so disheartening..

OP posts:
darkmodeon · 20/06/2023 21:17

What is the interest rate on the help to buy sorry?

Original poster
BlueMumma2018 · 20/06/2023 21:32

@darkmodeon i actually don’t know! It’s quite confusing! I know the first year we’re paying around £80 per month but then each it rises..

OP posts:
CatsOnTheChair · 20/06/2023 21:33

How much will you "save" each month by putting off the interest free loan? How much interest will they add.
I'd have thought that would only be a tiny amount of the new repayment?

Have you got a load of equity now?? If so, could you borrow the extra 5%, and pay it off over a longer time wrapped into the mortgage? This is an expensive way to do it!

Interest rates aren't going to drop back to the sub 1%. You will need to find a way to pay off the deposit loan at much higher rates than you gave been used to. If you put off the deposit repayment, when / how do you think you would be able to pay it?

NorthernDuckling · 21/06/2023 08:15

Interest on the HTB in year 6 is 1.75%, then it increases by CPI plus 2%. I can’t imagine that CPI + 2% would be cheaper than the mortgage you’ve found, but who knows what will happen to inflation. Have you sought advice from your mortgage broker?

Have you got any savings you could use to pay down the loan? Do you know what your repayment would be?

Is it possible to do 50:50, pay off half with the mortgage and keep half of the HTB (if you borrowed 20%)?

https://www.gov.uk/help-to-buy-equity-loan#:~:text=You%20do%20not%20have%20to,the%20year%20in%20monthly%20payments.

yut · 21/06/2023 10:27

If you google help to buy calculators there are some online that will tell you how much you'll pay. We wanted to pay off at the 5 year point by remortgaging, but with house prices stagnating and interest rates high it doesn't seem worth it right now, the mortgage payment was much higher, so we will likely just refix for 2 years in the hope the market settles a bit, otherwise our mortgage will increase from £870 to over £2000.

yut · 21/06/2023 10:30

Although I think I may have read the calendar wrong, so I am panicking with you now OP lol.

yut · 21/06/2023 10:30

*calculator

yut · 21/06/2023 10:32

https://taylorsurveyors.co.uk/help-to-buy-interest-calculator/ this is the one I am looking at, it says we would pay £1400 in year 7 for £72000 HTB loan, but don't quite understand how that is so cheap for the inflation rate I put in? (8.7% is that the wrong one?)

safetyfreak · 22/06/2023 12:51

Hey OP,

I also have a help to buy equity loan, I would strongly advice against adding your loan onto your mortgage. Interest rates are so high at the moment, you will be paying MUCH MORE than just keeping the loan and paying the £80-100 interest per month.

We plan to keep the loan for 2-4 years, and wait for interest rates to drop then we will add the equity loan to our mortgage.

Hope this helps.

Overthebow · 22/06/2023 13:23

Can you pay off any of the loan with savings? We have friends who took out the help to buy and they saved to pay it all off at the end of the 5 years so they didn’t have to pay any interest.

yut · 22/06/2023 13:57

@Overthebow it's an (obvious) option I'm sure OP has considered, but realistically, how many people can pay off 20% of their house within 5 years, on top of a mortgage payment and during a cost of living crisis...

GasPanic · 22/06/2023 14:39

yut · 22/06/2023 13:57

@Overthebow it's an (obvious) option I'm sure OP has considered, but realistically, how many people can pay off 20% of their house within 5 years, on top of a mortgage payment and during a cost of living crisis...

Especially since if they were capable of paying it off, then they would have probably never needed the help to buy sub in the first place...

Augend23 · 22/06/2023 14:43

This has always seemed to me to be the major issue with HTB - it was a high risk strategy that people were encouraged to take to support the housing market with, frankly, little consideration of what they would do after 5 years.

Not that that is of help to the OP.

Original poster
BlueMumma2018 · 22/06/2023 17:46

Hi all, I am absolutely terrible with maths and figures. I don’t understand the maths of what I would be paying next year (help to buy interest) so I can’t work out if we would be better off postponing paying it off.

I am thinking that it’s risky to take on another £70k to do this when the base rate is now at 5% I’m guessing we’re looking at our new mortgage payment being even higher than what I originally posted. Also I read the headline today that gigantic housing market crash is inevitable. So we could possibly end up paying them this when the house price could fall drastically months later 😭 I have dyscalculia so I’m getting confused with all the numbers.. can anyone help?

OP posts:
Original poster
BlueMumma2018 · 22/06/2023 17:48

@safetyfreak thanks. Do you know how much it will increase next year? We are in year 6 and have just started paying £85 per month in interest. I don’t understand the increases in the following years! 😫

OP posts:
Original poster
BlueMumma2018 · 22/06/2023 17:52

Hi @NorthernDuckling what exactly is cpi? We are paying £85 per month currently in year 6. I really don’t know what to do as the mortgage rates are going to increase again following the new base rate today and not sure if the value of the house will end up falling soon

OP posts:
LightlySearedontheRealityGrill · 22/06/2023 19:13

The CPI is the consumer price index, its basically tracks inflation so its been at record highs. The calculation for Help to Buy interest rates is below, if the CPI stays as it is (hopefully not) then:

yr 6 Not applicable = 1.75%
yr 7 1.75% (year 6 rate) + 1.88% (1.75% x (8.7% CPI + 2%) = 3.63%
yr 8 3.63% (year 7 rate) + 3.88% ( 3.63% x (8.7% CPI + 2%) = 7.51%

So you in year 7 its probably cheaper to leave the loan, but unless inflation decreases, it might not be in yr 8. Although who knows what mortgage interest rates will be in order to reduce inflation.

gratefulheart · 22/06/2023 19:21

I'm not sure that's right?
Martin Lewis describes it differently?

www.moneysavingexpert.com/mortgages/help-to-buy-equity-loans/#:~:text=Remember%2C%20you%20pay%20interest%20on,to%201.97%25%20and%20so%20on.

LightlySearedontheRealityGrill · 22/06/2023 19:51

No he explain the calculation exactly the same, the only difference is:
(1) Assumes constant CPI rate of 1%.

Which is no longer the case.

Augend23 · 22/06/2023 21:02

But it's not that the increased rate is added to the 1.75%, it's applied to the 1.75% isn't it? So if inflation is 8%, then you'd add 2% to that and the year 7 interest would be 1.75% x (1+(8%+2%) = 1.75% x 1.1 = 1.925% ? Wouldn't it?

Unless I've misunderstood, which is possible, as I don't have a loan like this.

gratefulheart · 22/06/2023 21:05

This is an example showing based on 6 percent rpi, not far off where we are, with much smaller increments in interest percentage than you have calculated?

End of mortgage term September and due to pay off help to buy…!
LightlySearedontheRealityGrill · 22/06/2023 21:22

The interest is the CPI + 2% (not 1%), and its cumulative. I based my calculation on the formula below, which is correct, but I might be wrong I did it quick!

End of mortgage term September and due to pay off help to buy…!
Original poster
BlueMumma2018 · 23/06/2023 07:11

Thanks so much for your help I think I understand it now!

Our remortgage staying in the same term (29 years left) will be £1034. To remortgage to pay off help to buy also will be £1550 possibly higher if the quote we were given by lender at 5.5% increases.

what would you do?

OP posts:
KokoKardash · 23/06/2023 07:48

Hi op. If you don't remortgage to pay the help to buy this time what's your plan

If you go with the 1034 mortgage over 29 years and separately pay the interest what is your action plan to get the h2b money paid back another time

Do you have enough equity to take out the h2b loan and what Loan to value would that leave your house at if you took that money out? Can you save a chunk of money over the next 2/3 years before the h2b interest increases?

I really don't think were going to see interest rates reduce to sub 1% if anything 4/5% will probably be the norm

RedToothBrush · 23/06/2023 07:59

Help to buy was an absolute con and disaster waiting to happen.

Get out of it if you can. The figures will only get worse. Interest rates are unlikely to slide much in the next few years. The sub 2% rates were unnaturally low - you couldn't afford the house and scheme when you bought it for this reason even though on paper it said you could.

This has the potential to emerge as scandal which should never have happened.