Help to buy question

[jonwm]

Hiya

Just looking at options of spending some money on my house or moving to a new build which I would need the help to buy, benefit being I get a much bigger house than I do now and in the first 5 years the mortgage is literally £200 more, happy days.

However after 5 years the £63k the government have lent me needs repaying, how do they calculate this assuming I don't have the means to repay in full? which I wont!

Now I don't fully understand the repayment of this loan, so its 1.75% in year 6 rising by 1% plus RPI there after according to the web, so would I be paying approx £100 a month back in year 6 as interest?

Sorry for the vagueness, trying to head the wife off at the pass you see :-)

Any insight would be welcome

[Sarnie]

Yes.

But don't forget that it's an "Equity" loan..........so if your property value goes up, so does the amount you owe back to the government........

[jonwm]

Thanks for the reply, i'm assuming this is only the case if I were to move though? so I will still "owe" the same amount in 10 years time if I don't move?

Are you able to remortgage as easy with an equity loan, does the lender know you have this?

I'm looking at long term really as it all sounds really good for the first 5 years!!

[Sarnie]

jonwm said:

Thanks for the reply, i'm assuming this is only the case if I were to move though? so I will still "owe" the same amount in 10 years time if I don't move?

Are you able to remortgage as easy with an equity loan, does the lender know you have this?

I'm looking at long term really as it all sounds really good for the first 5 years!!

No, if your property has gone up in value in ten years time and you apply to repay the Equity loan, the amount repayable will have gone up, line with the value of your property, it's got nothing to do with moving home, it is simply the value of your property at the time you apply to repay the loan.

If it goes down then naturally the value of the equity loan goes down.

It's actually very difficult to remortgage with the Equity Loan hanging around as essentially, it's a secured loan.

The government would be really happy if you keep it for 20 years, paying £100pm and then when you come to pay it off, your property has gone up £100k and they get their original amount back plus £20k plus the interest you've paid each month.........

Edited by Sarnie on Wednesday 3rd August 16:43

[jonwm]

Excellent, thanks,
I Think in 2 posts I've now got the compelling case for the wife!
The re mortgaging thing was playing on my mind, if and when the rates go up i'd hate the idea of being trapped with a mortgage that may be harder to change and also have a loan hanging over.

Very much appreciate your feedback and advice.

[poll250]

I'm also looking at this Government Equity Loan scheme (I live in Oxford, the most unaffordable city in the UK!).

I'm not clear on one thing: If you start to repay the Equity part of the loan within the first 5 years, you can only do it in 10% chunks. How much this 10% will bedepend on the value of the house at the time you are paying the loan back, so will the bank have to revalue the house every time I want to pay a lump back? Also, will there be a charge for revaluing the house?

From the outside, it looks like a great way to get on the ladder, but with house prices going up by ~8% per year, the Equity Loan would grow substantially over 5 years...

[AyBee]

poll250 said:

I'm also looking at this Government Equity Loan scheme (I live in Oxford, the most unaffordable city in the UK!).

I'm not clear on one thing: If you start to repay the Equity part of the loan within the first 5 years, you can only do it in 10% chunks. How much this 10% will bedepend on the value of the house at the time you are paying the loan back, so will the bank have to revalue the house every time I want to pay a lump back? Also, will there be a charge for revaluing the house?

From the outside, it looks like a great way to get on the ladder, but with house prices going up by ~8% per year, the Equity Loan would grow substantially over 5 years...

I think it's set at 10% because they will need to revalue the house every time you make a repayment (not sure if there's a cost but I'd assume so). I looked into this a while back in London but I'd have been looking at borrowing the full £200k and basically hoping for a £40k salary increase over the 5 years in order to get rid of the loan in year 5...didn't like the sound of that