Paying off Help to buy to purchase second property

[mickyme1]

Hi everyone,

For an overview, my DH and I both earn 105K gross between us. Our current house which we bought for 450k and its now worth 600k. The help to buy (HTB) we took on this was 20% out of which 10% is paid off and remaining 10% is what I currently have in bank. We are also interested in buying a second property (approx 250k) on BTL as an investment rather than putting money elsewhere.

My question: is it sensible to pay off the remainder 10% of HTB or use this against deposit for second home? We will have to borrow a bit more to pay off the HTB first I believe.

Greatly appreciate an advice here as to which route should I take?

Thanks.

Won’t this depend on where you are in the HTB loan? Are you still in the interest free period or paying interest now? If you’re still in the interest free period will you be able to save up enough to clear the debt when the CPI +2 interest is applied?

Ah apologies for the oversight. I forgot to mention that we are still in the interest free period as its been just short of 3 years into the HTB loan. We should be able to save up for another 2 years and clear off this loan.

I have never done this but a friend of mine has just sold a BTL property she bought 20 years ago because she said it is no longer worth it. So I can't say but make sure a BTL is going to get you returns worth having. Personally I would pay off the mortgage first & then decide where you want to put your money. Being heavily invested in one sort of investment is not always the right way to go. But - if I knew what I was talking about I would probably be a lot richer than I am now 😊

Thanks for clarification! I would take advantage of the interest free period on your loan and not pay it off now, put the money into savings with a decent return until you need to pay it off. It’s 1.75% in year 6, is that right? So see where interest rates are in 2 years and decide whether you keep it for another year and pay it off before the cpi rates of interest apply, or pay it off at the end of 5 years.

Also I echo PP’s suggestion (I know it’s not what you asked) that BTL isn’t really worthwhile at the moment, especially if you need a mortgage to do so. Right now you can get better, hassle free returns and no risk by putting the money in cash savings. Things have gotten gradually worse for private landlords under the Conservatives and it could get even worse under Labour. I’d wait it out until after the next election.