Help To Buy - Equity loan interest and staircasing

Glittering_Feeling

My fixed rate mortgage deal comes to an end next July, so I’m beginning to weigh up next steps. 

Purchased my flat in 2017 with 31% help to buy equity loan. I have enough in cash to staircase 10%. I can remortgage to borrow enough to clear it, however with the interest rates as they are I’m not sure that makes the most sense. 

Property value has gone down since I purchased.  I know the 10% will be calculated at the value today (and not at time of purchase). 

 

But what I can’t work out is the impact on my monthly interest I pay on the loan. I would still have 21% loan to pay interest on, but what value do they use to calculate the 21%. The value of the original equity loan? Or would it be revalued at the current value of the flat?

I assume the original loan value since it doesn’t reference this in the Help to Buy government guide but wanted to check! 

katkatmachine

I believe it will be 21% of the original property price. That’s what it says here:

https://www.gov.uk/help-to-buy-equity-loan#:~:text=You%20do%20not%20have%20to,at%20a%20rate%20of%201.75%25.


From the sixth year, you’ll be charged interest monthly at a rate of 1.75% on 10% of the original property purchase price. The interest rate will increase every year in April, by adding the Consumer Price Index (CPI) plus 2%.