Mortgage Questions - HTB and future planning...
Discussion
Thought I'd throw this out there as my wife and I are currently doing a lot of financial planning and I'm trying to get a long-term view on the best approach to our situation.
So, we recently bought a new-build house as FTBs in 2014 through Help To Buy to the tune of £285k - we stuck in our 5% deposit and obviously the Government and Homebuilder contributed the other 20% to which they have that stake in our property - meaning a loan of approx £215k over 30 years. I understand for the first 5 years the HTB 'loan' is interest-free before we then start paying the interest.
My question is really around overpayments and the 20% stake which we can staircase out of in a minimum of 10% lump sums (based on the value of the property at the time we wish to staircase). Our lender, Halifax, has no restrictions on overpayment apart from the first two years of our fixed rate for which they state "you can make overpayments up to 10% of the outstanding balance each calendar year" - after this point when no early repayment fees apply, we can overpay whatever we like.
My question I guess is this... would we be better putting our 'overpayment' into a savings account somewhere and use it to staircase say 10% in the property in 4 years time, or just overpay on the mortgage itself? Has anyone been in a similar situation? Since taking on the house which we saved for years for the 5%, we've had huge changes in our careers and a significant increase in our combined income which will allow us to easily overpay or save the (estimated) £35k to staircase 10% of the HTB loan in the next 4-5 years whilst remaining comfortable for potential increases in interest that would affect our monthly payments on the mortgage.
It might be worth mentioning that we could be looking to move to a slightly larger home by the time the 5 year point comes, so I'm really not sure if it's easier to just overpay on the mortgage and let the government/home builder take their 20% of the sale? The idea of overpayment in my mind is not really to reduce the term of our mortgage, but to allow us to financially access a larger home. I guess the issue we have in reality is we'll have little to no equity in such a short space of time and as such would be just remortgaging on a bigger property, but without others having a stake in the property...
Interested to hear any thoughts - I'm really not great when it comes to this stuff but I'd like to understand a little more about how others perceive the options.
So, we recently bought a new-build house as FTBs in 2014 through Help To Buy to the tune of £285k - we stuck in our 5% deposit and obviously the Government and Homebuilder contributed the other 20% to which they have that stake in our property - meaning a loan of approx £215k over 30 years. I understand for the first 5 years the HTB 'loan' is interest-free before we then start paying the interest.
My question is really around overpayments and the 20% stake which we can staircase out of in a minimum of 10% lump sums (based on the value of the property at the time we wish to staircase). Our lender, Halifax, has no restrictions on overpayment apart from the first two years of our fixed rate for which they state "you can make overpayments up to 10% of the outstanding balance each calendar year" - after this point when no early repayment fees apply, we can overpay whatever we like.
My question I guess is this... would we be better putting our 'overpayment' into a savings account somewhere and use it to staircase say 10% in the property in 4 years time, or just overpay on the mortgage itself? Has anyone been in a similar situation? Since taking on the house which we saved for years for the 5%, we've had huge changes in our careers and a significant increase in our combined income which will allow us to easily overpay or save the (estimated) £35k to staircase 10% of the HTB loan in the next 4-5 years whilst remaining comfortable for potential increases in interest that would affect our monthly payments on the mortgage.
It might be worth mentioning that we could be looking to move to a slightly larger home by the time the 5 year point comes, so I'm really not sure if it's easier to just overpay on the mortgage and let the government/home builder take their 20% of the sale? The idea of overpayment in my mind is not really to reduce the term of our mortgage, but to allow us to financially access a larger home. I guess the issue we have in reality is we'll have little to no equity in such a short space of time and as such would be just remortgaging on a bigger property, but without others having a stake in the property...
Interested to hear any thoughts - I'm really not great when it comes to this stuff but I'd like to understand a little more about how others perceive the options.
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