Help to Buy Equity Loan - Optimal repayment time

maxthepolarbear

I currently have a help to buy (equity loan) mortgage – put up 5% deposit and got 20% from the government.

Currently on a fixed 2 year mortgage expiring in August next year and I am wondering when the optimal time would be to repay the 20% equity loan (and I plan to do this by remortgage that 20%)

There might not be much point repaying the equity loan before the end of the five year period because it is interest free. But it would be more expensive to repay the 20% (in monetary terms) after five years if my house price has gone up a lot.

The drawback on repaying early obviously is that I’d need to pay interest on the 20% that I would otherwise not need to pay interest for. Plus repaying that will push me up a LTV tier (say from 70% to 90%) so I’d get worse interest rate.

Having said that, I wonder if there will be a case for repaying early (e.g. the increase in my house value after 5 years will increase the value of my equity loan more than the extra interest that I had to pay if I were to repay early).

Also – is there advantage of paying off this equity loan in two parts (10% each) rather than one one chunk?

Any advice is appreciated.

getmore4less

As you have to pay back more if the prices go up.

You are trading interest free for increased debt

you can look at what the rolling up the interest would end up at if the value goes up faster you are worse off.

chanz4

It may not be intrest free if prices have gone up already

libf

maxthepolarbear wrote: »

Also – is there advantage of paying off this equity loan in two parts (10% each) rather than one one chunk?

You'll need to pay two sets of solicitors and HTB agent fees instead of paying these once.