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Renewed Investor

Clarify Htb For Me

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I've googled this and couldn't find a definitive answer. Maybe I've missed something reading the sites as it is 3am and I'm tired but here goes.

The HTB schemes offer a fixed rate for few years but then what? Does it go to variable? Do you have to renegotiate the terms? A friend of mine has jumped in on a 2 year fixed rate deal and even he doesn't know.

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75% normal mortgage terms the 20% loan from the taxpayer is free for five years after that there is a fixed (annual rate ?) for the 20% if it is not paid down

Edited by long time lurking

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75% normal mortgage terms the 20% loan from the taxpayer is free for five years after that there is a fixed (annual rate ?) for the 20% if it is not paid down

In respect of the interest rate of the HTB loan after 5 years, here's a quote from my IFA's recent newsletter:

The loan will be interest-free for 5 years, after which interest will be payable starting at a rate of 1.75% and increasing each year by the RPI rate of inflation plus 1%. The loan must be paid off in full when the property is sold.

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In respect of the interest rate of the HTB loan after 5 years, here's a quote from my IFA's recent newsletter:

The loan will be interest-free for 5 years, after which interest will be payable starting at a rate of 1.75% and increasing each year by the RPI rate of inflation plus 1%. The loan must be paid off in full when the property is sold.

Am i reading this right ?

Say RPI @ 3% +1.75% +1% =5.75% simple enought but it states "increasing each year by the RPI rate of inflation plus 1%." so dose this mean the second year will be 5.75%+RPI + 1% ?

You would be looking at credit card rates on the 20% loan in three to five years

Or is it 1.75% is the base then each year you get a new rate depending on what the RPI rate is at the time (this could be where I got the annual rate from)

Edited by long time lurking

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Am i reading this right ?

Say RPI @ 3% +1.75% +1% =5.75% simple enought but it states "increasing each year by the RPI rate of inflation plus 1%." so dose this mean the second year will be 5.75%+RPI + 1% ?

You would be looking at credit card rates on the 20% loan in three to five years

Or is it 1.75% is the base then each year you get a new rate depending on what the RPI rate is at the time (this could be where I got the annual rate from)

No - let's say inflation is constant at 1%.

Year 6 you pay 1.75%

Year 7 you pay 1.75*1.02 = 1.785%

Year 8 you pay 1.785*1.02 = 1.821%

etc ...

i.e. the 1.75% initial charge rises (as a percentage) each year by inflation + 1%.

Seems like an utterly random way of charging someone for a loan but hey .... the HTB equity loan is rediculously cheap money, were it not to be used for buying rediculously over priced houses.

Edited by gimble

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Am i reading this right ?

Say RPI @ 3% +1.75% +1% =5.75% simple enought but it states "increasing each year by the RPI rate of inflation plus 1%." so dose this mean the second year will be 5.75%+RPI + 1% ?

You would be looking at credit card rates on the 20% loan in three to five years

Or is it 1.75% is the base then each year you get a new rate depending on what the RPI rate is at the time (this could be where I got the annual rate from)

No,

1.75%

Then 1.82%, then 1.89% etc if you assume constant 3% inflation. Its described as a fee and I don't think anyone knows how its going to be collected yet.

That's years off :rolleyes:

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Thanks that makes more sense

....there is no such thing as a free lunch....therefore saving a 10% deposit may be a better way to do it. :unsure:

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....there is no such thing as a free lunch....therefore saving a 10% deposit may be a better way to do it. :unsure:

Saving your deposit then putting it in the bank for the five year free period probably the most sensible. Pay it off before they start charging a fee.

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What I cant work out is ...

When you make capital repayments on the mortgage does any proportion of the equity load get payed off ? (i'm assuming not).

Can you add the equity loan to your deposit at levels higher than 5% e.g. if I had a 30% deposit can I get it topped up to 50% ?.

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simple really ...you asked for clarification..here it is.

propping up insane prices on a speculative asset bubble with your own money(courtesy of the exchequer)

...and no, it doesn't help.

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What I cant work out is ...

When you make capital repayments on the mortgage does any proportion of the equity load get payed off ? (i'm assuming not).

Can you add the equity loan to your deposit at levels higher than 5% e.g. if I had a 30% deposit can I get it topped up to 50% ?.

I was thinking along those lines.

Lets say I had a 50% deposit of £100k and wanted a interest free £20k to play with then I would declare that I have a 10k deposit, borrow £20k from "Brown & co. Ltd" then once I had drawn down dump the rest back into the mortgage, thus saving interest on £20k.

One problem with this strategy is the interest rates on the higher LTV are more than double that I could get otherwise.

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