Help to Buy equity loans were introduced in 2013 to help buyers get on the property ladder. If you bought your property using this type of loan when they were introduced, you may now have started to pay interest on the loan. Interest becomes payable after 5 years at which point you will need to start making repayments. It is worth weighing up your options; is it better to repay the loan in full with other funds? Or is it better to make the loan repayments?
One option is to remortgage your property and consolidate the entire equity loan. This means you will have a larger mortgage but just one monthly payment and you will no longer have the equity loan. It is important to check if there are any fees payable to redeem your existing mortgage as this may make this not option worthwhile. You may incur fees if you take out a new mortgage and there is also a fee to redeem the equity loan. Whether this is feasible for you will be dependant upon the value of the property, your affordability as well as your credit history and other factors.
Another option is to keep the equity loan and make the repayments. If paying both your mortgage repayments and the equity loan repayments is affordable for you then this option may also suit you. Alternatively you could pay off the equity loan with your own savings. This would be worthwhile doing if it is affordable as you would not incur any interest on the equity loan and it would also mean you have full ownership of the property.
If you opt to keep the equity loan, upon sale of the property you would need to give the government the same percentage of the sale price as you opted for when you purchased the property. If you had remortgaged the property and consolidated the equity loan, or you had repaid the equity loan with your own savings you would not need to give the government a percentage upon sale.
If you have a Help to Buy Equity Loan and you are now making repayments or are due to make them in the near future, it is worth contacting an independent financial adviser to discuss your options.
Jenny Croskery Cert CII (MP)
8th October 2018