should I pay off my equity loan?

Pugnator

9 months ago I completed the purchase of my house with the help of an equity loan from help to buy.

Value was £110,000. I paid 5% and HtB 20%. I let Barratts and the solicitors take care of all the paperwork, I just signed whatever I got told to sign.

AIUI, I will start paying interest on my equity loan after 5 years but I don't actually have to pay it off unless I sell the property. Which means I'll only ever get 80% of my property's value. Not that I plan to sell in the near or mid future.

I'm wondering, what is the best thing to do financially?

Should I just leave the loan where it is and pay the interest...

Or should I endeavour to save as much as I can, as quickly as I can in order to pay the loan off in full?

I have a mortgage that allows me to over pay so would I be better off channeling any funds into overpaying that or, as above, saving to pay off the loan?

Any advice, much appreciated.

Thrugelmir

Overpaying the mortgage now is a good option to consider. As provides a discipline. While the loan is interest free. This then helps provide further equity with which to redeem the HTB loan at a later date. Overpaying can become addictive. As chipping away at the mortgage debt over time does become self incentivising.

getmore4less

Do hhe numbers

The savings are a better rate on your mortgage and interest free on 20% for 5 years.

The potential saving/cost is you don't own 20% of the property.

If that 20% is going up faster than the savings on borrowing costs better to buy out the equity and pay the interest.

The sooner you have the cash/equity to make the choice the better.
if you don't have enough then borrowing more will potentially make the rate higher on the lot. have a look at the rates for various HTB LTV and then 100% ownership that give bigger choice of lenders.

AIUI you can pay off 50% or 100% so getting to 50% is a good target to start with, then review