help to buy equity loan 2nd charge

Bonez14

Why is there a second charge on final completion?

A second charge is registered on your home by your solicitor in favour
of Homes England, entitling it to a share of the future sale proceeds.
The charge will be equivalent to the percentage contribution made
towards the purchase price. You must repay the percentage
contribution when you sell your home or after 25 years (whichever is
earlier).

is this avoidable? for 600K thats 30k extra plus inflation etc after 25 years. these solicitors will make a fortune. how is this fair?

DoaM

What is/was the first charge?

PS - the wording says that Homes England are the beneficiary of the charge, not any solicitor. And where are you getting inflation from? The wording says the charge is a percentage of the purchase price, not the future sale price.

AdrianC

Umm, I think you might be misunderstanding... The charge is removed if and when you settle the loan.
Unless you settle it beforehand, then you have to repay the loan on sale of the property or after 25yrs.

If you borrow 20% of the value, you have to repay 20% of the value at the time you settle. Is that really so horribly unfair?

"Second charge" means that Homes England are behind your mortgage lender (who have the first charge) in the queue for money from the sale.

If you don't like it, don't take the loan. Nobody's forcing you to.

DoaM

Thanks ... I forgot about the mortgage lender having a charge on a property.

Bonez14

AdrianC wrote: »

Umm, I think you might be misunderstanding... The charge is removed if and when you settle the loan.
Unless you settle it beforehand, then you have to repay the loan on sale of the property or after 25yrs.

You are referring to the 40% equity loan? this will be paid

AdrianC wrote: »

If you borrow 20% of the value, you have to repay 20% of the value at the time you settle. Is that really so horribly unfair?

"Second charge" means that Homes England are behind your mortgage lender (who have the first charge) in the queue for money from the sale.

If you don't like it, don't take the loan. Nobody's forcing you to.

I thought this is extra money to pay on top of mortgage and equity loan?

SmashedAvacado

OP - i have missed the bit where the solicitors make a fortune. Can you enlighten?

Bonez14

"A second charge is registered on your home by your solicitor in favour
of Homes England, entitling it to a share of the future sale proceeds" - it is solicitor?


"The charge will be equivalent to the percentage contribution made
towards the purchase price" - so thats 5 % for every application they do after 25 years?

AdrianC

Bonez14 wrote: »

You are referring to the 40% equity loan? this will be paid

And at that point, the charge is removed.

I thought this is extra money to pay on top of mortgage and equity loan?

Where do you get this from?

Let's go over it bit by bit...

Bonez14 wrote: »

A second charge is registered on your home by your solicitor in favour of Homes England, entitling it to a share of the future sale proceeds.
The charge will be equivalent to the percentage contribution made towards the purchase price. You must repay the percentage contribution when you sell your home or after 25 years (whichever is earlier).

"A second charge" - the first charge is your mortgage.
"by your solicitor in favour of Homes England" - your solicitor does the work, the charge says you owe HE the money. HE are the government agency behind the HTB EqLoan.
"The charge will be equivalent to the percentage contribution made towards the purchase price" - the HtB loan was 40%? Then you repay 40%. If it was 5%, you repay 5%. It's maximum 20% outside London, 40% inside.
"You must repay the percentage contribution" - no other or additional amount
"when you sell or after 25yrs" - that's when you must. But you can choose to at any time - and the charge will then be satisfied and removed.

It's basically just the legal mechanism for enforcing what you agree to repay when you take the loan out.

The word "charge" isn't "We're charging you £x" - it's the term for the way a creditor puts a restriction on sale until you've repaid them. It's the way every mortgage works.

Bonez14

thanks a lot. makes more sense now. they should make it more easy to understand

AdrianC

Bonez14 wrote: »

thanks a lot. makes more sense now. they should make it more easy to understand

It's very clear. You just need to learn the specific meaning of a few words in this particular context.

foxy-stoat

Bonez14 wrote: »

is this avoidable? for 600K thats 30k extra plus inflation etc after 25 years. these solicitors will make a fortune. how is this fair?

It is completely avoidable - dont take out the equity loan and use a traditional mortgage to buy your property.

Its not all bad - the equity loan is interest free for 5 years.
You only need to start paying interest in year 6, at 1%, then it goes up every year.
Your mortgage will be cheaper for the first 5 years without having to make payment on the 20%.

If you cannot afford to buy the property without the loan then you wont be able to buy the property.

You just need to make a savings plan to repay either half of the loan (plus a provision for increased value) or all of it within 5 years and not bury head in sand and come on here claiming mis-selling in a few years time.