Um, you compare the interest only (not the capital repayment difference) and then you include the 80k for HTB on top of that? David paid 360k plus interest in those 25 years and Lisa paid 280k plus interest. There's your 80k difference, David was paying that anyway with a higher monthly payment. And actually Lisa is better off in terms of capital repayment because she can pay that 80k whenever she wants. The major advantage of help to buy is that you get it interest free for 5 years plus you get a lower interest for your mortgage. After those 5 years you can either repay it with cash (if you can of course) or remortgage and get that cash as a loan (add it to your mortgage) to repay it. That's like getting the 90% mortgage initially but not having to pay interest for that 80k for 5 years. If that's in London then that's even better. I think the major disadvantage of HTB is not interest but the fact that if the house price goes up it might (and probably will) go up more than the interest percentage so you'll have to pay much more, but in a market that the prices have skyrocketed like now, it acts like a hedge. If prices go down you can "buy the dip" by repaying part of HTB. Also it limits you to new builds and you have to commit to live there until you repay it because you can't let it.
Yes, you’re correct. I agree that adding £80k at the end in the way that I did is not completely fair. However, the cost of a loan or mortgage is the interest paid. The fact that the cost of financing a £360k loan is cheaper than a £280k loan with HTB is worth noting. Also, if Lisa chose to repay the £80k after 25 years, she’ll still probably need another loan to do it - adding to the total interest she pays. In reality, that £80k would’ve grown with the value of the property, because it’s an equity loan (not a fixed amount loan), which means that after 25 years, the outstanding loan could easily have doubled to £160k or more. This is a form of interest as well to Lisa because it’s more than the initial £80k she took out. This means in reality Lisa would’ve likely paid more than the £85k difference between her and David in the example. This is the big draw back of HTB. It’s the fact that the outstanding loan increases with the value of the property. Also, paying back the loan is not a straight forward process and will incur additional legal, surveyor and administration fees. Here’s a video where I discuss this process: ruclips.net/video/Qz-q8KdrZHg/видео.html
Amazing content. You are the only one I saw on RUclips that breaks it down like this. Extremely helpful. The only thing I would suggest is to pick up the pace a bit. For example, when you mention the assumptions, there was no need to repeat "my Xth assumption is...". When you go through the numbers, no need to read the exact numbers. I hope the channel grows!
Thank you! I enjoy making this type of video, so I'm really glad you liked it. I appreciate the feedback and I agree with you. I'm naturally quite a slow speaker, but I could be more succinct in my explanations.
I hope you enjoyed the video! I really want to know whether it was easy to follow/understand, and if you like this type of example video. Let me know down in the comments and don’t forget to subscribe! Thank you for watching!!
First time searching for a video explaining the help to buy 2021 scheme. I quickly skipped 3 other channel's videos (on the same topic) before I got to yours. You made it really easy to follow, thank you, look forward to learning more from your videos🤙🏻🤙🏻
That’s great to hear. Thank you for watching! I’ve got quite a few videos on the Help to Buy scheme, here’s the playlist: ruclips.net/p/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_ Hope you enjoy!
LOVED THIS!!!! YPU HAVE NO IDEA HOW GRATEFUL I AM FOR THIS!! It was so in-depth, but still easy for novices to follow along!! Thank you so very much!!!!
I’ve seen your RUclipss before and they are very good. I know this is a different subject, but I have shared ownership and I am in a quandary what to do. I live in Surrey and brought this property due to divorce and it’s the worst thing I have done. The property was over priced and the stair casing is impossible. With the current climate I cannot afford a mortgage. I have to achieve the full asking price if the council cannot sell within 8 weeks. I paid cash for my 43% of the property and i don’t have a mortgage and I am certain that when I sell I will lose money. My property is 4 years old. Another tenant brought their flat the same time as mine for £300,00 and when they sold to the council they lost £10,000 how can this be. I am now worried that when I come to sell and with the housing market increased I will too lose money. I am now thinking of buying land do you think this is a good investment which is the only way in which I can afford to buy which I will own and live on the land with a log cabin. Thank you so much I would appreciate your input.
Just saving up my deposit currently so your videos have been *super* useful. I'm leaning towards Help To Buy. For comparison videos like this which have multiple components, I think it would be useful to plug in some different numbers right at the end to see how it affects the outcome and to increase the chances of this content remaining relevant to the viewer. For example a 20 vs 25 year mortgage or perhaps Lisa could pay off the equity loan.
Thanks for watching and I'm glad to hear you're finding the videos useful! I think that's a good suggestion - showing a snapshot of different scenarios at the end of a video like this. I need to rewatch this video. I remember being very proud of it at the time. Do let me know you if you have any video suggestions, I need to get back to making them! Anyway, good luck with your house hunt!
@@SelfInvested Thank you. You're were right to be proud of this video - I'm just nit-picking. Please do keep uploading. You have a "small" channel but the reality is that you've undoubtedly helped THOUSANDS of people with their property investment journey.🙂
I found this really useful thank you! There is an extra cost in remortgaging too so I suppose both examples would lose some money going through that process. In an ideal world I believe being David is the better option a lot of HTB new builds are overpriced and in some areas people can sell them at a loss. The advantage of a HTB is that the house is new and the sale can be quick. I have been bitten before trying to buy a house and losing out on solicitors fees because the property I intended to purchase had some legal issues. The process on a old house is 3 months + whereas a new build some of my friends have closed in 6 weeks and the developers do everything to get the sale through. I can see how it is tempting but based on your example its really not worth it if you are in a position to wait most people wont pay off the loan in 5 years. When you posted this in October most mortgages were 20% which is another reason for people to be lured into the HTB.
My pleasure, Honeybee! I agree, I wouldn't use the H2B loan if I didn't need it. There's also evidence to show H2B borrowers pay more for new builds than people not using the scheme!
This video is invaluable, thank you for crunching the numbers and transparency of assumptions. I've made an assumption myself and wanted to see what you thought... Can someone who has 30% of the property value in hand to spend take advantage of this by right away paying off the equity loan... Assumed benefits being no interest on 20% of the property value. Does the higher interest rate of the repayment mortgage driven by HTB outweigh the interest savings, and is this person pretty much in the same position getting a mortgage for 70% LTV without HTB? Any thoughts would be much appreciated!
If I understand you correctly, from the examples I’ve seen the interest rate between a 70% HTB mortgage and non-HTB mortgage would be small, and I don’t think the benefit of the 0% interest period will be lost because of this difference… Hope this makes sense and answers your question
@@SelfInvested thanks for your input on this, much appreciated! Having thought about this a bit longer, I believe there is large fee either when you make a payment and/or when you payoff the HTB which does decreases the margin of this approach. Can still come out of it with a couple thousand in savings though.
Interesting to see the numbers side to side. I know there are a few assumptions made, but it's interesting to see and, confirms that HTB isn't quite as bad as what I thought it was especially in the short term!
Nice video, really well explained. I like the fact you broke down how much someone paid and made at different time. The difference at the start was amazing so can be so much cheaper which makes a huge difference but always good to run the number.
Thank you for the feedback! I love doing the numbers!! I actually came across your channel this week and had a question/suggestion on your ISA video. I’ll comment on the video!
How does Lisa still have her HTB loan outstanding at the end? Didn't she pay it in bits until she came to the end (the same way she paid off the mortgage in bits by the end of 25 years)?
Hi Bikash! Thank you for leaving a comment. The payments made on a HTB loan, from year 6, only go towards the interest of the loan. They are not repayments, so Lisa was only paying the interest (not the principle) over that whole period. There is a completely different process for repaying the loan, which involves solicitors and surveyors. Check out this video to learn more about repaying the HTB loan: ruclips.net/video/Qz-q8KdrZHg/видео.html
Nice video with clear information. However I would not go for the help to buy equity simply because the loan is paid back as a whole or in two installments which makes iy difficult and pushes people to sell the property to pay it back. In turn it will lead to what you mentioned inthe video (the amount increases as the value of the property increases with time) as one tries to save up the amount to pay back.
Great video. I’ve been looking at houses of £180,000-200,000 and looking at if I could pay of the equity loan in 5 years. Or if taking less than the 20% would be better such as using 10% making the equity loan easier to pay of before the interest starts. Lots to think about 🙄
You’re very welcome! Thank you for watching! Yes, you need to pay back 100% of the equity loan if you sell or after 25 years (I think, it’s been a while, forgive me), whichever happens first. However, you do start paying interest on the loan from year 6…
Major thought after watching this video is that help to buy loan gives you better start with lwer interest rates but as you get older and property gains on value ( which is natural) Lisa has more burden to pay if off completely.That may be overwhelming if you sick to paying mortgage only not thinking to pay equity loan from govt's program.
Great video, I have to say though I got lost on the numbers. You said interest rates are higher with help to buy then you added lower interest rate on Lisa? What if properties rise in value on help to buy, can you remortgage and pay off the help to buy loan?
Hi Steve, thank you for watching! Just to clarify, when I said interest rates for HTB borrowers is higher, I was referring to the mortgage interest rates. Say for example, if Lisa and David were both taking out 70% LTV mortgages (but Lisa was using a 20% HTB Equity Loan and 10% deposit, and David had a 30% deposit without HTB), David would have access to lower interest rates on his 70% LTV mortgage because mortgage lenders set higher mortgage interest rates for people using HTB. The reason Lisa's mortgage interest rate is lower in the example is because her initial LTV is 70%, and David's is higher because his is 90%. Typically, the lower the LTV of a mortgage, the lower the interest rate. If David and Lisa's LTVs were the same, David's mortgage interest would be lower because Lisa is a HTB borrower. Hope this makes sense!
Very helpful vedio..Suppose if I am buying a new house with 15% deposit which I have, do you think that still I will be able to borrow 20% from the government so that I could get the mortgage for 65% with better interest? Thanks
Glad you found it helpful! Don’t think there would be any issue with that, but it does raise the question as to whether you actually need the HTB loan?
I have two questions: 1) If someone wanted to pay off thier HTB loan by year 5, would they usually end up in a much better situation than the pure mortgage route, as you are not paying interest on the HTB loan in years 1-5? 2) If someone were to pay off the HTB loan within the first 5 years, given the amout to pay could increase in line with the property value, would it be best to consider paying in chunks every year or so rather than the full amount at year 5 - That way you might mitigate some of the potental HTB costs (loan to value %) if the property value was creeping up...?
Thanks for your questions but the answers are not straight forward. 1) Possibly, but depends on a number of factors. In the example, the interest rate of David’s first mortgage was over a percent more than Lisa’s, which meant she paid a lot less interest than David. Also, David’s mortgage was bigger than Lisa’s, which meant he would have paid more interest even if their rates were the same. After 5 years, David had paid £20,725.80 more interest than Lisa. If Lisa then decided to remortgage and pay off the HTB loan (£80k if the property value remained the same), she would have a total outstanding balance of £312,731.76 (LTV=78.18%), but David would have a balance of be £304,776.64 (LTV=76.19%). If their mortgages had the same interest rates, say 1.75%, and were paid off over 20 years, this would cost David a further £56,523 in interest, and Lisa an additional £57,998. Overall, this means David would have paid £19,250.80 more in interest than Lisa over the full 25 years (really rough calculations quickly done, hopefully correct!) However, the more the value of the properties increased over the first 5 years (before Lisa repaid) the less true this would be and the more things would move in the other direction. Also, the lower David’s interest rates are in relation to Lisa’s over each of the periods, the less true this this would be and the more things would move in the other direction. 2) Again, this depends. But yes, I think more likely than not, you’ll be better off paying it back in full after 5 years, rather than waiting longer because you’ll avoid interest payments and reduce the risk of the property’s value increasing further. Also, when you pay back the HTB loan, there are other fees you’ll need to pay, such as: solicitor, surveyor and administration fees, so it may be better paying it off in one go rather than in chunks (check out my latest video on repaying the HTB loan). Finally, I don’t think it’s a sensible idea to take out the HTB loan if you don’t need it because you put yourself at greater risk financially. But make sure to speak to a qualified professional adviser to get advice tailored to your needs. My examples are generic and for educational purposes only. They are not meant as advice and are not going to be specific to your situation. Hope you found this helpful.
@@SelfInvested I found this very useful indeed and I am very grateful for your considered response. I look forward to more of your videos and appreciate these are not meant as financial advice and more for consideration and general knowledge. Cheers!
Thank you so much for this video! The visuals and your breakdown of the numbers was really helpful for a simpleton like me. I shall subscribe. Can I ask if you know whether the help to buy scheme in London is limited to new builds only or if I would be eligible to apply to it for a house too?
Haha! You’re welcome Munira! Thank you for the subscription! The Help to Buy Equity Loan is only for new builds, but you can buy both houses and flats with it.
Great Video! Thanks for crunching all those numbers for us. If Lisa was able to pay off the HTB equity loan in the first 5 years, do you think this would make the total interest paid less than David over the 25 year total?
Thanks Connor! From my example, yes. But in reality it will depend on the size of your H2B loan and how much your property increases in value over that time. But, you’re correct. There’s a good chance it will be cheaper overall if you pay off the loan in 5 years
i have an important question if you can respond please - if i repay my full HTB equity loan and the property value goes up by 20%, do i need to pay anything to the gov in relation to that increase AFTER the equity loan is completely paid off?
If I understand you correctly, no. If you’ve paid back your Help to Buy loan in full and own 100% of your home, then sell at a later date, there will be no further payments the Help to Buy loan, even if your property goes up by 20%.
Very informative video. Well done!! do you know if its allowed to pay off some or all the equity loan with an unsecured bank loan if the interest rates are better?
Not sure tbh. But it will be difficult to find a bank loan with an interest rate lower than the equity loan. The only benefit I can see by doing that is the bank loan will be for a fixed amount (won’t increase with the value of your home)...
Good Video . thank you for the clear explination, what if I close the Help to buy loan within or end of 5 year and the property value increase by 10%. Example :100000 £ help to buy 20000 £ and deposit 10000 £ what if the Propery price increase to 110000 by end of 5 year, do I need to pay 20100 to Government. ?
So if I understand you correctly, the initial purchase price is £100,000. The value increased to £110,000. That’s a 10% increase. If you took out a 20% loan or £20,000, the loan amount due would be £22,000 (20% of £110,000)
Thank you for the awesome videos Adding to this question,is one allowed to pay back the equity loan before the end of five years in installments or as a lump some hence evading the need for revaluation?
I don't think there is a way to avoid the re-valuation. Even when you get a valuation done, it's only valid for 3 months. If you don't repay the loan within 3 month of the valuation date, you'll need to get it updated. Hope this answers your question... My latest video focuses on the repayment process and cost. You can watch for more information...
Thank you! I’m glad you enjoyed it! When you sell your home with H2B, you have the repay the loan in full. With your mortgage, you have to repay it also, unless you’re buying a another property and your lender allows you to port your existing mortgage to that new property. Hope that answers your question?!
Can I ask what happens if I decide to go ahead with garage conversion while still under the help to bye.. Will they fine me if I do it without thier permession??will they raise any legal proceedings against me or possess the house? I think they will charge me 20% of the cuurent value of the property when we pay off the loan which i am happy to pay as long as there is no legal proceedings. Any thoughts or advice.
In terms of permission, as I understand it, you'd need to get consent from the people that managing the H2B scheme in your area. The equity loan is linked to the value of your home. So, if you make structural alterations without permission and it increases the value of your home, the equity loan amount you owe will increase. However, if get permission to make structural alterations and the value of your home increases, they may ignore the value of that alteration when they work out how much you owe on your equity loan. Have a look at the H2B guidance notes here: assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/962941/Homebuyers-guide-to-Help-to-Buy-Equity-Loan-2021-2023.pdf If any doubt, call your local H2B agent for advice.
I cant really understand how you calculate those numbers? First example with David 360 000 * (0,0285 Rate) = 10260£. And after 5 years 10260 x 5 = 51300£ Seems I simplified to much Could you please write a formula for that first calculation?
Hey Aninel! So, mortgage interest costs are not as straight forward as you've calculated for a number of reasons, including: the interest that's charged is based on the outstanding mortgage, which is reducing month-to-month as you make repayments; and mortgage interest is usually calculated on a daily as opposed to yearly basis - so, the interest charged for would be something like £360k*(2.85%/365). It's not easy to calculate, so I just used this mortgage calculator - www.mortgagecalculator.uk/
@@SelfInvested Okey thank you for answer. Let assume that after 5 years we have payed 41,677£. Then one more question why our outstanding balance after 5 years is 304,776£. Because initial was 360 000 - 41,667 (we have payed) = 318 333£. but not 304,776£. I completely confused
For 5-10 years you are better off with help to buy? because thats usually the case for most people unless you are buying your forever home and stay there for long term.
Thanks for the question! In the example, yes. Lisa pays less interest than David until the last period. But it's important to remember that David owns 100% of his property (with a mortgage) but Lisa only owns 80% because the government essentially owns 20% through the EQUITY loan. @luke7920 asked a questioned about who would be better off if Lisa paid back the loan after 5 years which I think is worth reading. Have a look at his question and my answer in the comments. Hope you found this helpful!
Yes, you should be able to repay the loan before the end of the interest free period, but the minimum you can pay back is 10% of the property's current value...
Hello there , I have a genuine question . Lets say that you but a 3 bedroom apartment with 150,000 help to buy and you are one person . Lets say that you will not able to rent it out . But you rent out the rooms as an airbnb to people and you also stay in the apartment . are you allowed to do that?
Hi there! I’m not sure you would be allowed to do that, unfortunately. You could always ask your help to buy agent to double check but I think it’s unlikely…
@@SelfInvested would be nice to see videos on more creative ways to buy a house apart from help to buy/ shared ownerships. For example as a self employed I struggle getting a mortgage even though I have a good amount of savings.
@@tomstopper5281 I will definitely make more non-H2B videos... I know it’s difficult for self employed, especially in the current economic environment! Have you spoken with a mortgage adviser at all?
Yes, it is possible you remortgage to pay it off but this depends on you having enough equity and/or a high enough salary to borrow the additional money you need...
As far as I understand, at the point you wish to make a repayment on the loan, you will need to get a valuation - even if it is within the first 5 years
Realistically the price of the property will increase. The problem is as the property increase the value of the equity loan increases. The government are not silly and they never loose out, read between the lines 😉
@@SelfInvested Agreed, I understand your angle. Only thing is the explanation makes it sound like H2B is the better thing to do, but those of us who are actually ‘in the know’ understand that H2B should generally be avoided unless there’s a strategy in place. Not criticism - But we know must young people thinking of using the scheme might watch this video and go for H2B over a standard mortgage, without doing thorough research.
In this example, yes. But I wouldn't use the H2B loan if I didn't need it, and in reality it will depend on the size of your H2B loan and how much your property increases in value over that time.
@@SelfInvested my property was £155k and the help to buy was 31k. so I was thinking just remortgage after 5 years to pay off the help to buy. The property would of gain at least £15/20k buy the 5years i think
So Help to Buy is brand which include both the Help to Buy: Equity Loan, and the Shared Ownership scheme. Generally, though, when people say Help to Buy, they’re referring to the Equity Loan scheme
How does this make sense? The point of having this scheme is to use it if you do not have the 40k deposit, it's there to only deposit the 5% that's just an innacurate comparison
Why do you say it's inaccurate? According to the National Audit Office (NAO), around three-fifths (60%) of buyers that used Help to Buy could have bought a property without it's support (source: www.nao.org.uk/wp-content/uploads/2019/06/Help-to-Buy-Equity-Loan-scheme-progress-review.pdf ). It's not clear why people use the scheme when they don't need it, but I thought it would be good to do a comparison of buying with and without the scheme and see what happens, because the majority of people that have used it, didn't actually need it. Also, you can put any deposit down - 5% and over - for the scheme...
@@SelfInvested Possibly yes. A maximum of 5 years may seem a good starter before the interest rate escalates. Thanks and keep posting more of such pros and cons in especially on those new flats/leaseholder issues etc.
No problem! Here’s my playlist on the Help to Buy Equity Loan: ruclips.net/p/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_ And I’m guessing you’ve already seen my videos on new builds vs older builds ( ruclips.net/video/okjtPNQHdG0/видео.html ), and leasehold vs freehold ( ruclips.net/video/B-GZhQ0P48w/видео.html )?
Um, you compare the interest only (not the capital repayment difference) and then you include the 80k for HTB on top of that? David paid 360k plus interest in those 25 years and Lisa paid 280k plus interest. There's your 80k difference, David was paying that anyway with a higher monthly payment. And actually Lisa is better off in terms of capital repayment because she can pay that 80k whenever she wants.
The major advantage of help to buy is that you get it interest free for 5 years plus you get a lower interest for your mortgage. After those 5 years you can either repay it with cash (if you can of course) or remortgage and get that cash as a loan (add it to your mortgage) to repay it. That's like getting the 90% mortgage initially but not having to pay interest for that 80k for 5 years. If that's in London then that's even better.
I think the major disadvantage of HTB is not interest but the fact that if the house price goes up it might (and probably will) go up more than the interest percentage so you'll have to pay much more, but in a market that the prices have skyrocketed like now, it acts like a hedge. If prices go down you can "buy the dip" by repaying part of HTB. Also it limits you to new builds and you have to commit to live there until you repay it because you can't let it.
Yes, you’re correct. I agree that adding £80k at the end in the way that I did is not completely fair. However, the cost of a loan or mortgage is the interest paid. The fact that the cost of financing a £360k loan is cheaper than a £280k loan with HTB is worth noting. Also, if Lisa chose to repay the £80k after 25 years, she’ll still probably need another loan to do it - adding to the total interest she pays. In reality, that £80k would’ve grown with the value of the property, because it’s an equity loan (not a fixed amount loan), which means that after 25 years, the outstanding loan could easily have doubled to £160k or more. This is a form of interest as well to Lisa because it’s more than the initial £80k she took out. This means in reality Lisa would’ve likely paid more than the £85k difference between her and David in the example.
This is the big draw back of HTB. It’s the fact that the outstanding loan increases with the value of the property. Also, paying back the loan is not a straight forward process and will incur additional legal, surveyor and administration fees. Here’s a video where I discuss this process: ruclips.net/video/Qz-q8KdrZHg/видео.html
Amazing content. You are the only one I saw on RUclips that breaks it down like this. Extremely helpful.
The only thing I would suggest is to pick up the pace a bit. For example, when you mention the assumptions, there was no need to repeat "my Xth assumption is...". When you go through the numbers, no need to read the exact numbers.
I hope the channel grows!
Thank you! I enjoy making this type of video, so I'm really glad you liked it.
I appreciate the feedback and I agree with you. I'm naturally quite a slow speaker, but I could be more succinct in my explanations.
This was very helpful brother. Thank you
You’re welcome brother! I’m glad you found it useful. I appreciate the comment!
I love your videos. They are simple, clear and no unnecessary background music.
Lol! Thank you, bro 🙏🏿 Glad you enjoy them! I’m working on improving the audio as well so there’s no low static sound...
I hope you enjoyed the video!
I really want to know whether it was easy to follow/understand, and if you like this type of example video.
Let me know down in the comments and don’t forget to subscribe!
Thank you for watching!!
First time searching for a video explaining the help to buy 2021 scheme. I quickly skipped 3 other channel's videos (on the same topic) before I got to yours. You made it really easy to follow, thank you, look forward to learning more from your videos🤙🏻🤙🏻
That’s great to hear. Thank you for watching! I’ve got quite a few videos on the Help to Buy scheme, here’s the playlist: ruclips.net/p/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_
Hope you enjoy!
Good videos
Thank you!
LOVED THIS!!!! YPU HAVE NO IDEA HOW GRATEFUL I AM FOR THIS!! It was so in-depth, but still easy for novices to follow along!! Thank you so very much!!!!
Great feedback! You are very welcome! I’m really happy you found it useful! So are you going to use the scheme then?
New subbie It is great to see Brits talk about finance, thanks for this!
Welcome!! Thank you for the sub! I love talking about how we can be smarter with our money. I hope you enjoy the content!
I’ve seen your RUclipss before and they are very good. I know this is a different subject, but I have shared ownership and I am in a quandary what to do. I live in Surrey and brought this property due to divorce and it’s the worst thing I have done. The property was over priced and the stair casing is impossible. With the current climate I cannot afford a mortgage. I have to achieve the full asking price if the council cannot sell within 8 weeks. I paid cash for my 43% of the property and i don’t have a mortgage and I am certain that when I sell I will lose money. My property is 4 years old. Another tenant brought their flat the same time as mine for £300,00 and when they sold to the council they lost £10,000 how can this be. I am now worried that when I come to sell and with the housing market increased I will too lose money. I am now thinking of buying land do you think this is a good investment which is the only way in which I can afford to buy which I will own and live on the land with a log cabin. Thank you so much I would appreciate your input.
Just saving up my deposit currently so your videos have been *super* useful. I'm leaning towards Help To Buy.
For comparison videos like this which have multiple components, I think it would be useful to plug in some different numbers right at the end to see how it affects the outcome and to increase the chances of this content remaining relevant to the viewer. For example a 20 vs 25 year mortgage or perhaps Lisa could pay off the equity loan.
Thanks for watching and I'm glad to hear you're finding the videos useful! I think that's a good suggestion - showing a snapshot of different scenarios at the end of a video like this. I need to rewatch this video. I remember being very proud of it at the time. Do let me know you if you have any video suggestions, I need to get back to making them! Anyway, good luck with your house hunt!
@@SelfInvested Thank you. You're were right to be proud of this video - I'm just nit-picking. Please do keep uploading. You have a "small" channel but the reality is that you've undoubtedly helped THOUSANDS of people with their property investment journey.🙂
Thanks so much for breaking this down, the visuals really helped!
Enjoyed making this one. I’m glad you found it helpful!
Very helpful on HTB and buying a property outright, thanks for the advice 👍
Glad you found it helpful but it’s just general information, rather than advice on any specific situation!
Love the way you give good examples 👌🏿
Thank you Stelley! :)
I love your videos and yes they are easy to understand. Keep it up.
Thank you for watching!
I found this really useful thank you! There is an extra cost in remortgaging too so I suppose both examples would lose some money going through that process. In an ideal world I believe being David is the better option a lot of HTB new builds are overpriced and in some areas people can sell them at a loss. The advantage of a HTB is that the house is new and the sale can be quick. I have been bitten before trying to buy a house and losing out on solicitors fees because the property I intended to purchase had some legal issues. The process on a old house is 3 months + whereas a new build some of my friends have closed in 6 weeks and the developers do everything to get the sale through. I can see how it is tempting but based on your example its really not worth it if you are in a position to wait most people wont pay off the loan in 5 years. When you posted this in October most mortgages were 20% which is another reason for people to be lured into the HTB.
My pleasure, Honeybee! I agree, I wouldn't use the H2B loan if I didn't need it. There's also evidence to show H2B borrowers pay more for new builds than people not using the scheme!
This video is invaluable, thank you for crunching the numbers and transparency of assumptions. I've made an assumption myself and wanted to see what you thought... Can someone who has 30% of the property value in hand to spend take advantage of this by right away paying off the equity loan... Assumed benefits being no interest on 20% of the property value. Does the higher interest rate of the repayment mortgage driven by HTB outweigh the interest savings, and is this person pretty much in the same position getting a mortgage for 70% LTV without HTB? Any thoughts would be much appreciated!
If I understand you correctly, from the examples I’ve seen the interest rate between a 70% HTB mortgage and non-HTB mortgage would be small, and I don’t think the benefit of the 0% interest period will be lost because of this difference… Hope this makes sense and answers your question
@@SelfInvested thanks for your input on this, much appreciated! Having thought about this a bit longer, I believe there is large fee either when you make a payment and/or when you payoff the HTB which does decreases the margin of this approach. Can still come out of it with a couple thousand in savings though.
@@raoulthedutch Good point!
Interesting to see the numbers side to side. I know there are a few assumptions made, but it's interesting to see and, confirms that HTB isn't quite as bad as what I thought it was especially in the short term!
Thanks for the comment! For sure! The problem isn’t necessarily the loan, but how people use it!
@@SelfInvested Agreed!
Nice video, really well explained. I like the fact you broke down how much someone paid and made at different time. The difference at the start was amazing so can be so much cheaper which makes a huge difference but always good to run the number.
Thank you for the feedback! I love doing the numbers!! I actually came across your channel this week and had a question/suggestion on your ISA video. I’ll comment on the video!
@@SelfInvested you’re welcome. Thanks man look forward to it.
How does Lisa still have her HTB loan outstanding at the end? Didn't she pay it in bits until she came to the end (the same way she paid off the mortgage in bits by the end of 25 years)?
Hi Bikash! Thank you for leaving a comment. The payments made on a HTB loan, from year 6, only go towards the interest of the loan. They are not repayments, so Lisa was only paying the interest (not the principle) over that whole period. There is a completely different process for repaying the loan, which involves solicitors and surveyors. Check out this video to learn more about repaying the HTB loan: ruclips.net/video/Qz-q8KdrZHg/видео.html
@@SelfInvested Thanks very much, that explains it.
You are very welcome. Thank you for watching!
Nice video with clear information. However I would not go for the help to buy equity simply because the loan is paid back as a whole or in two installments which makes iy difficult and pushes people to sell the property to pay it back. In turn it will lead to what you mentioned inthe video (the amount increases as the value of the property increases with time) as one tries to save up the amount to pay back.
Thank you! You make valid points!
Great video. I’ve been looking at houses of £180,000-200,000 and looking at if I could pay of the equity loan in 5 years. Or if taking less than the 20% would be better such as using 10% making the equity loan easier to pay of before the interest starts. Lots to think about 🙄
Thank you, Mark! The main thing is that you’re doing your homework!
Thank you really helpful, I understood now that we have to pay back all the equity loan, I thought only the interest 🤦🏽♀️
You’re very welcome! Thank you for watching! Yes, you need to pay back 100% of the equity loan if you sell or after 25 years (I think, it’s been a while, forgive me), whichever happens first. However, you do start paying interest on the loan from year 6…
This was a great video. I really liked the proforma.
Very easy to understand.
This is one of my favourite videos. So, I’m really glad you think so. Thank you for watching!
I got the equity loan out in 2010 at 44.9% equity.. on a circa 230K property... I am soooo screwed..🤷🏾♂️
Awesome vid my friend. Love your videos! Keep up this great content :) 🙂
Thank you!
Good work. I appreciate effort of the detailed example.
Thank you very much!
Major thought after watching this video is that help to buy loan gives you better start with lwer interest rates but as you get older and property gains on value ( which is natural) Lisa has more burden to pay if off completely.That may be overwhelming if you sick to paying mortgage only not thinking to pay equity loan from govt's program.
I don’t disagree with you. I think that’s a valid assessment!
Great video, I have to say though I got lost on the numbers. You said interest rates are higher with help to buy then you added lower interest rate on Lisa? What if properties rise in value on help to buy, can you remortgage and pay off the help to buy loan?
Hi Steve, thank you for watching! Just to clarify, when I said interest rates for HTB borrowers is higher, I was referring to the mortgage interest rates. Say for example, if Lisa and David were both taking out 70% LTV mortgages (but Lisa was using a 20% HTB Equity Loan and 10% deposit, and David had a 30% deposit without HTB), David would have access to lower interest rates on his 70% LTV mortgage because mortgage lenders set higher mortgage interest rates for people using HTB.
The reason Lisa's mortgage interest rate is lower in the example is because her initial LTV is 70%, and David's is higher because his is 90%. Typically, the lower the LTV of a mortgage, the lower the interest rate.
If David and Lisa's LTVs were the same, David's mortgage interest would be lower because Lisa is a HTB borrower.
Hope this makes sense!
Many thanks! I found that very enlightening. Cheers!
You're welcome! Thank you for watching 🙏🏿
Very helpful vedio..Suppose if I am buying a new house with 15% deposit which I have, do you think that still I will be able to borrow 20% from the government so that I could get the mortgage for 65% with better interest? Thanks
Glad you found it helpful! Don’t think there would be any issue with that, but it does raise the question as to whether you actually need the HTB loan?
I have two questions: 1) If someone wanted to pay off thier HTB loan by year 5, would they usually end up in a much better situation than the pure mortgage route, as you are not paying interest on the HTB loan in years 1-5? 2) If someone were to pay off the HTB loan within the first 5 years, given the amout to pay could increase in line with the property value, would it be best to consider paying in chunks every year or so rather than the full amount at year 5 - That way you might mitigate some of the potental HTB costs (loan to value %) if the property value was creeping up...?
Thanks for your questions but the answers are not straight forward.
1) Possibly, but depends on a number of factors. In the example, the interest rate of David’s first mortgage was over a percent more than Lisa’s, which meant she paid a lot less interest than David. Also, David’s mortgage was bigger than Lisa’s, which meant he would have paid more interest even if their rates were the same.
After 5 years, David had paid £20,725.80 more interest than Lisa.
If Lisa then decided to remortgage and pay off the HTB loan (£80k if the property value remained the same), she would have a total outstanding balance of £312,731.76 (LTV=78.18%), but David would have a balance of be £304,776.64 (LTV=76.19%). If their mortgages had the same interest rates, say 1.75%, and were paid off over 20 years, this would cost David a further £56,523 in interest, and Lisa an additional £57,998. Overall, this means David would have paid £19,250.80 more in interest than Lisa over the full 25 years (really rough calculations quickly done, hopefully correct!)
However, the more the value of the properties increased over the first 5 years (before Lisa repaid) the less true this would be and the more things would move in the other direction.
Also, the lower David’s interest rates are in relation to Lisa’s over each of the periods, the less true this this would be and the more things would move in the other direction.
2) Again, this depends. But yes, I think more likely than not, you’ll be better off paying it back in full after 5 years, rather than waiting longer because you’ll avoid interest payments and reduce the risk of the property’s value increasing further. Also, when you pay back the HTB loan, there are other fees you’ll need to pay, such as: solicitor, surveyor and administration fees, so it may be better paying it off in one go rather than in chunks (check out my latest video on repaying the HTB loan).
Finally, I don’t think it’s a sensible idea to take out the HTB loan if you don’t need it because you put yourself at greater risk financially. But make sure to speak to a qualified professional adviser to get advice tailored to your needs.
My examples are generic and for educational purposes only. They are not meant as advice and are not going to be specific to your situation.
Hope you found this helpful.
@@SelfInvested I found this very useful indeed and I am very grateful for your considered response. I look forward to more of your videos and appreciate these are not meant as financial advice and more for consideration and general knowledge. Cheers!
Thank you for the feedback! It’s really appreciated!! Hope you enjoy what’s to come!
Thank you so much for this video! The visuals and your breakdown of the numbers was really helpful for a simpleton like me. I shall subscribe. Can I ask if you know whether the help to buy scheme in London is limited to new builds only or if I would be eligible to apply to it for a house too?
Haha! You’re welcome Munira! Thank you for the subscription!
The Help to Buy Equity Loan is only for new builds, but you can buy both houses and flats with it.
Great Video! Thanks for crunching all those numbers for us. If Lisa was able to pay off the HTB equity loan in the first 5 years, do you think this would make the total interest paid less than David over the 25 year total?
Thanks Connor! From my example, yes. But in reality it will depend on the size of your H2B loan and how much your property increases in value over that time. But, you’re correct. There’s a good chance it will be cheaper overall if you pay off the loan in 5 years
@@SelfInvested Thanks for your help!
My pleasure ;)
i have an important question if you can respond please - if i repay my full HTB equity loan and the property value goes up by 20%, do i need to pay anything to the gov in relation to that increase AFTER the equity loan is completely paid off?
If I understand you correctly, no. If you’ve paid back your Help to Buy loan in full and own 100% of your home, then sell at a later date, there will be no further payments the Help to Buy loan, even if your property goes up by 20%.
@@SelfInvested great thanks for the reply! Much appreciated God bless
Would you say it’s worth getting a HTB loan
What a GREAT advise. Thank you, sir!
Glad you enjoyed the video!
Very informative video. Well done!! do you know if its allowed to pay off some or all the equity loan with an unsecured bank loan if the interest rates are better?
Not sure tbh. But it will be difficult to find a bank loan with an interest rate lower than the equity loan. The only benefit I can see by doing that is the bank loan will be for a fixed amount (won’t increase with the value of your home)...
Also the equity loan has rules that’s very restrictive. But thanks anyways 🙏🏽 keep up the good work
true!
Big help!! Thanks
You’re welcome! Thank you for watching 🙏🏿
Good Video . thank you for the clear explination, what if I close the Help to buy loan within or end of 5 year and the property value increase by 10%.
Example :100000 £ help to buy 20000 £ and deposit 10000 £
what if the Propery price increase to 110000 by end of 5 year, do I need to pay 20100 to Government. ?
So if I understand you correctly, the initial purchase price is £100,000. The value increased to £110,000. That’s a 10% increase. If you took out a 20% loan or £20,000, the loan amount due would be £22,000 (20% of £110,000)
Thank you for the awesome videos
Adding to this question,is one allowed to pay back the equity loan before the end of five years in installments or as a lump some hence evading the need for revaluation?
I don't think there is a way to avoid the re-valuation. Even when you get a valuation done, it's only valid for 3 months. If you don't repay the loan within 3 month of the valuation date, you'll need to get it updated. Hope this answers your question... My latest video focuses on the repayment process and cost. You can watch for more information...
@@SelfInvested Yea I'm answered
Thank you very much.
Hey loved this video!
Do you have to pay off the rest of the mortgage, when you sell the house after 5 years? (with help to loan)
Thank you! I’m glad you enjoyed it!
When you sell your home with H2B, you have the repay the loan in full. With your mortgage, you have to repay it also, unless you’re buying a another property and your lender allows you to port your existing mortgage to that new property.
Hope that answers your question?!
@@SelfInvested okay thanks for the reply, one more question, does the old house belong to you after porting the existing mortgage to a new property?
No, apologies for not being clearer, In the situation I mentioned, you’d be selling the property you bought with H2B to buy a different property.
@@SelfInvested thank you so much I understand it now
Amazing content, thank you for sharing.
Awww… thank you for watching! 🙏🏿
This was an excellent video. Love the maths. Keep up the good work 👏🏿
Thank you! Were you able to follow ok?
@@SelfInvested Most definitely. Your scenarios made it easier to digest 👌🏿
@@NebulaVisualsGreat stuff! Thank you for the feedback!
Can I ask what happens if I decide to go ahead with garage conversion while still under the help to bye.. Will they fine me if I do it without thier permession??will they raise any legal proceedings against me or possess the house?
I think they will charge me 20% of the cuurent value of the property when we pay off the loan which i am happy to pay as long as there is no legal proceedings. Any thoughts or advice.
In terms of permission, as I understand it, you'd need to get consent from the people that managing the H2B scheme in your area.
The equity loan is linked to the value of your home. So, if you make structural alterations without permission and it increases the value of your home, the equity loan amount you owe will increase.
However, if get permission to make structural alterations
and the value of your home increases, they may
ignore the value of that alteration when they work out how much you owe on your equity loan.
Have a look at the H2B guidance notes here: assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/962941/Homebuyers-guide-to-Help-to-Buy-Equity-Loan-2021-2023.pdf
If any doubt, call your local H2B agent for advice.
Now to find a house that I only want to live in for 5-10 years that is less than £450k (LISA) that is also a new build and close to london..... oh no
Good luck!
I cant really understand how you calculate those numbers? First example with David
360 000 * (0,0285 Rate) = 10260£. And after 5 years 10260 x 5 = 51300£ Seems I simplified to much
Could you please write a formula for that first calculation?
Hey Aninel! So, mortgage interest costs are not as straight forward as you've calculated for a number of reasons, including: the interest that's charged is based on the outstanding mortgage, which is reducing month-to-month as you make repayments; and mortgage interest is usually calculated on a daily as opposed to yearly basis - so, the interest charged for would be something like £360k*(2.85%/365). It's not easy to calculate, so I just used this mortgage calculator - www.mortgagecalculator.uk/
@@SelfInvested Okey thank you for answer. Let assume that after 5 years we have payed 41,677£. Then one more question why our outstanding balance after 5 years is 304,776£. Because initial was 360 000 - 41,667 (we have payed) = 318 333£. but not 304,776£. I completely confused
For 5-10 years you are better off with help to buy? because thats usually the case for most people unless you are buying your forever home and stay there for long term.
Thanks for the question! In the example, yes. Lisa pays less interest than David until the last period. But it's important to remember that David owns 100% of his property (with a mortgage) but Lisa only owns 80% because the government essentially owns 20% through the EQUITY loan.
@luke7920 asked a questioned about who would be better off if Lisa paid back the loan after 5 years which I think is worth reading. Have a look at his question and my answer in the comments.
Hope you found this helpful!
good explanation bro,, good to know the difference... . many thanks
Glad you think so! Thanks for commenting. You planning to get a HTB loan?
@@SelfInvested yes I am planning, but next year..
@@geekatlab6402 I think next year might be a better time to buy for FTB! All the best with it!!
@@SelfInvested thanks for the videos, keep posting really learned a lot
@@geekatlab6402 Thank you! Really appreciate the encouragement!!
Thank you!
You are very welcome. Thank you for watching!
Great video! Thank you
You’re welcome! Thank you for leaving a comment :)
Forever valuable 🙏🏾 thanks
You’re welcome. Thank you for watching!
Thank you so much! So helpful!!!
Glad you found it helpful! Thank you for letting me know 🙏🏿
Great video, thank you!
I’m glad you liked it! Thank you for watching!
Can you pay towards the HTB loan during the interest free period?
Yes, you should be able to repay the loan before the end of the interest free period, but the minimum you can pay back is 10% of the property's current value...
Hello there , I have a genuine question . Lets say that you but a 3 bedroom apartment with 150,000 help to buy and you are one person . Lets say that you will not able to rent it out . But you rent out the rooms as an airbnb to people and you also stay in the apartment . are you allowed to do that?
Hi there! I’m not sure you would be allowed to do that, unfortunately. You could always ask your help to buy agent to double check but I think it’s unlikely…
Really good information 🙌
Thank you Kay! 😉
Nice videos, it is great to just have an non professional point of view. Thanks.
You’re welcome. I’m glad you liked the videos! Here’s a playlist of all the H2B ones I’ve made: ruclips.net/p/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_
@@SelfInvested would be nice to see videos on more creative ways to buy a house apart from help to buy/ shared ownerships. For example as a self employed I struggle getting a mortgage even though I have a good amount of savings.
@@tomstopper5281 I will definitely make more non-H2B videos... I know it’s difficult for self employed, especially in the current economic environment! Have you spoken with a mortgage adviser at all?
Is it possible to have had re mortgaged the remaining £80k at some point rather than leave it til the end of term?
Yes, it is possible you remortgage to pay it off but this depends on you having enough equity and/or a high enough salary to borrow the additional money you need...
Hello, if I had 25k and took out a loan of £20,000 HTB and plan to repay the 20,000 before the end of the 5 years, will it still be revalued?
As far as I understand, at the point you wish to make a repayment on the loan, you will need to get a valuation - even if it is within the first 5 years
Realistically the price of the property will increase. The problem is as the property increase the value of the equity loan increases. The government are not silly and they never loose out, read between the lines 😉
Very true! The example I gave was very simplified!
@@SelfInvested Agreed, I understand your angle. Only thing is the explanation makes it sound like H2B is the better thing to do, but those of us who are actually ‘in the know’ understand that H2B should generally be avoided unless there’s a strategy in place.
Not criticism - But we know must young people thinking of using the scheme might watch this video and go for H2B over a standard mortgage, without doing thorough research.
I’ll need to watch this video again to make sure I’m not giving this message! I might need to do a follow up if I am…
Good information.
Glad it was helpful!
Hi so is it better to use the help to buy then remortgage after 5 years to pay the help to buy off?
In this example, yes. But I wouldn't use the H2B loan if I didn't need it, and in reality it will depend on the size of your H2B loan and how much your property increases in value over that time.
@@SelfInvested my property was £155k and the help to buy was 31k. so I was thinking just remortgage after 5 years to pay off the help to buy. The property would of gain at least £15/20k buy the 5years i think
If you can pay it back before the interest kicks in, sounds like you’ll be doing well!
@@SelfInvested thank you very much mate. i will pay the help to buy loan back before the 5 years is up bu remortgaging ✌🏾.
Is a ‘Help to buy loan’ and a ‘Help to Buy scheme’ the same thing? 🤔
So Help to Buy is brand which include both the Help to Buy: Equity Loan, and the Shared Ownership scheme. Generally, though, when people say Help to Buy, they’re referring to the Equity Loan scheme
Sick video bro
Thank you brother!
Great content!
Thank you for the feedback! I’m glad you found it useful!!
thank you! That was very usefull
Thank you! I’m glad you thought so! Are you thinking of taking out a HTB loan?
Thank you so much 👏🏽👏🏽👏🏽
My pleasure!
👏🏾👏🏾👏🏾
Thank you! 🙏🏿
How does this make sense? The point of having this scheme is to use it if you do not have the 40k deposit, it's there to only deposit the 5% that's just an innacurate comparison
Why do you say it's inaccurate?
According to the National Audit Office (NAO), around three-fifths (60%) of buyers that used Help to Buy could have bought a property without it's support (source: www.nao.org.uk/wp-content/uploads/2019/06/Help-to-Buy-Equity-Loan-scheme-progress-review.pdf ).
It's not clear why people use the scheme when they don't need it, but I thought it would be good to do a comparison of buying with and without the scheme and see what happens, because the majority of people that have used it, didn't actually need it.
Also, you can put any deposit down - 5% and over - for the scheme...
This is a very good video indeed! You have explained pretty much every little important point on having an HTB and not.
Thank you! I appreciate the comment. Are you planning to use the scheme?
@@SelfInvested Possibly yes. A maximum of 5 years may seem a good starter before the interest rate escalates. Thanks and keep posting more of such pros and cons in especially on those new flats/leaseholder issues etc.
No problem! Here’s my playlist on the Help to Buy Equity Loan: ruclips.net/p/PLUG_SDz9gLQJIBs_0uHERF90GRFLamKv_
And I’m guessing you’ve already seen my videos on new builds vs older builds ( ruclips.net/video/okjtPNQHdG0/видео.html ), and leasehold vs freehold ( ruclips.net/video/B-GZhQ0P48w/видео.html )?