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Help to Buy Equity Repayment
Hi there,
I seriously misunderstood the T&Cs when taking out a Help2Buy equity loan in 2021.
While aware it is 20% equity in the house value at time of remortgage and/or sale, I believed it wasn't 20% of the current home value at time you decided to repay without remortgaging or selling.
I was hoping to start repaying the loan after end of year 5 based on the amount borrowed, but now knowing this could rise to £80k from £60k borrowed, this has left me extremely worried about my finances. I cannot afford to add £80k to my mortgage for obvious reasons around interest rates, and am struggling to find out how I could ever pay off an additional £20k without selling the house.
Does anyone have any advice? I am kicking myself for not fully understanding how it worked when taking it out. Plan was always to start repaying the loan separately to my mortgage with 10% lump sums when possible.
Suddenly realising this H2B initiative was very much a bad decision to make. Thanks in advance.
Comments
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So after year 5 you start to pay interest on the loan, but this interest rate starts off very low, so it makes sense to keep the HtB loan and start to repay the main mortgage. That should reduce your monthly payments, in time you could then remortgage the HTB into your main mortgage.
I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.1 -
Don’t panic too much, there is nearly always a solution, @aliababa, Given this is concerned with mortgages and housing, I’ll move it to the mortgages board.
I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.1 -
Speak to a mortgage advisor and they will go through your options with you.
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"So after year 5 you start to pay interest on the loan, but this interest rate starts off very low, so it makes sense to keep the HtB loan and start to repay the main mortgage."
Not convinced of this, the HTB loan will keep increasing as a percentage of the property so its not quite that simple. Ignoring it year on year could be very expensive with good house price inflation.
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I think you’re right. Appreciate it
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You do need to bare in mind though that the more the property increases in value the more you will be liable to pay back.
The safe option is repaying the HTB loan as soon as possible. Do the figures allow you to remortgage and add the HTB loan to your mortgage amount?
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