Help to Buy Equity Loan - please clarify what happens after 5 years...

Tunstallstoven

Hi all

I'm just looking into this option and have got my head around it mostly! Apart from one thing....

After the first five years, what exactly happens? Aside from paying the mortgage on the 75% share as I would have been doing since moving in, what more will I have to pay after those first five years? Nothing? Just the interest on the governments' 20% contribution? Or interest AND some equity of the governments' 20% contribution?

Hoping someone can clarify!

Many thanks

andyf1980

Interest only on the government contribution.

Tunstallstoven

WOW - that was quick! Thank you very much.

And would that be interest on the 20% of what the house was when you bought it (I'm presuming so otherwise the house price would have to be continuously re-evaluated)?

LJG1985

Yes you will just pay interest on the original loan amount.


Then I believe you only pay back the HtB loan when selling the house (Or voluntarily by remortgaging).

Tunstallstoven

Great, thanks for clarifying.

The only other thing that is unclear at the moment is the interest rate. I've read the section in the article and can see that it is 1.75% and the rises annually by RPI inflation plus one percentage point. But is that 1.75% subject to change? And I guess I mean that in two ways...

- If the mortgage is taken out in the next year or two, is it likely that it might be a different rate by then?
- Once the mortgage has been taken out, what ever the rate is at that point, will it remain at that rate for the first five years? I know you're not paying interest during those years, but do you know exactly what interest rate you'll have in 5 years when you DO start paying interest. Or is that subject to change?

Thanks a million.

kingstreet

It's 1.75% in year six.

In year seven, if inflation is 5%, the rate will go up to 1.87%.

In year eight, if inflation is 5%, the rate will go up to 2.0%.

And so on.

There is an example in the HTB Buyer's Guide on page 14 IIRC.

These are "fees" not interest and do not qualify for SMI if you lose your job etc.

It is not related to the mortgage. The scheme works as indicated above unless HM Government changes it.