Using equity to pay back help to buy loan

Daisy_84

The interest on my help to buy equity loan is going to start from next year. I would like to use the equity accrued to pay off the loan. I was wondering if anyone has done this before? 

ACG

Other than selling the property and paying off the equity loan, I imagine it will be the next most common way to pay off the loan. 

andyf1980

Yes we did. The rate on our remortgage was slightly higher but it was worth it in the end as prices have gone up a lot where we bought. 

Daisy_84

andyf1980 said:

Yes we did. The rate on our remortgage was slightly higher but it was worth it in the end as prices have gone up a lot where we bought. 

Thanks for your response. I was wondering how you managed the process from start to finish. I have to do the same next year. 

andyf1980

So we had to find a surveyor to value the house and then we worked with a mortgage broker to deal with that. You need a solicitor to deal with the remortgage and also to deal with the HTB. 

Ours had not increased in value so there was no money to pay back in that way. 

Daisy_84

andyf1980 said:

So we had to find a surveyor to value the house and then we worked with a mortgage broker to deal with that. You need a solicitor to deal with the remortgage and also to deal with the HTB. 

Ours had not increased in value so there was no money to pay back in that way. 

Great. Thank you. 

Were the solicitor's fees expensive? 

How can you have accrued equity if the property value hadn't increased? I thought the money to pay the equity loan would be from the value increase. Am I missing something?

dimbo61

I guess they have been paying down the mortgage for the last 5 years and maybe even overpaying as well.
The property has not increased in value so the HTB equity loan is the same as it was at the start of the mortgage.
Some HTB loans were only 20% of the property value outside London while it's 40% in London

Daisy_84

dimbo61 said:

I guess they have been paying down the mortgage for the last 5 years and maybe even overpaying as well.
The property has not increased in value so the HTB equity loan is the same as it was at the start of the mortgage.
Some HTB loans were only 20% of the property value outside London while it's 40% in London

Interesting. Thanks. I’ve been paying over the last five years but not overpaying. Hope I have enough to cover the 20%

MWT

Daisy_84 said:

dimbo61 said:

I guess they have been paying down the mortgage for the last 5 years and maybe even overpaying as well.
The property has not increased in value so the HTB equity loan is the same as it was at the start of the mortgage.
Some HTB loans were only 20% of the property value outside London while it's 40% in London

Interesting. Thanks. I’ve been paying over the last five years but not overpaying. Hope I have enough to cover the 20%

What is the outstanding balance on your mortgage now?

Daisy_84

MWT said:

Daisy_84 said:

dimbo61 said:

I guess they have been paying down the mortgage for the last 5 years and maybe even overpaying as well.
The property has not increased in value so the HTB equity loan is the same as it was at the start of the mortgage.
Some HTB loans were only 20% of the property value outside London while it's 40% in London

Interesting. Thanks. I’ve been paying over the last five years but not overpaying. Hope I have enough to cover the 20%

What is the outstanding balance on your mortgage now?

It's £142,000. The Loan amount was £154,000. My fixed term ends in 2023. 

If property price was go down in value then it sounds like that may work in my favour with regards to paying back the equity loan, am I right? 

MWT

If the value of the property is lower then yes, the equity loan amount drops as well, but that doesn't help you when it comes to getting the new mortgage, as that also impacts on the amount of equity you have created through your mortgage payments reducing the existing loan.

So if you have the cash, the reduced value would be a benefit in relation to the equity loan, but if you need to raise the mortgage to pay it off then it isn't so helpful as it impacts on the LTV.

Has your value really fallen though? ... need to take a look at recent sales to get a better idea...