Repay help-to-buy loan or overpay monthly mort payments?

GSXRCOLLINS

Hi. I am considering using the equity loan scheme to purchase a property for £295k putting down £30k deposit and £56k gov equity loan. The Nationwide have a fixed 1.99% that mean monthly repayments of around £900.

This would enable me to overpay each month by as much as £500. Should I do this or should I be paying off the equity loan?

I have concerns over the resale value of the property in five years also with it being a new build.

I think that I am nervous about the scheme and worried I am doing the wrong thing.

Anyone else have any thoughts?

mrginge

You cant pay off the equity loan monthly.
Its either half or all of it in one lump sum

Cat2011

I would put the £500 a month into a high interest account for the next 5 years so that you have some means of paying off the government loan, or at least making a start, before the loan starts asking for interest.

(High interest accounts are currently higher than 1.99%. If your mortgage rate changed and became higher than savings rates I would pay off the mortgage instead).

bonbon49

If you put £500 away every month for five years, that would only allow you to pay off 10% of the loan, at 28k, obviously presuming the property hasn't gone up in value. If it has gone up you'd have some extra to make up possibly to staircase by 10%. If you did this then that would mean that when the monthly charge did kick in you'd only be paying it on the remaining 10% equity loan rather than the full 20%, which would obviously be a good thing.
If you can afford the mortgage as it stands then I'd save up and try to pay off the equity loan first, and then overpay the mortgage, or pay a little extra off the mortgage if it makes you feel better (and could take a couple of years off your mortgage at the same time).