Best ways to pay off Help 2 Buy equity loans?

Emma_Louise · 14 March 2017 at 7:14PM

My husband and I bought a home last July using the Help 2 Buy equity scheme, but I wondered how the bet way of paying it off is?

Our fixed rate mortgage was for a 2 year period, so at the end of this time, it' likely we will want to remortgage - is this even possible with the equity loan? Could we remortgage for a higher amount and use the excess to pay off the equity loan?

It's likely this won't be our 'forever home', so maybe the best option is to wait until we are ready to sell, and pay it off then? The only problem with this is that we have some plans to improve the property, which would hopefully put the value up, but in turn the equity loan repayment will go up.

I'm so confused and really don't know the best way to go about it. Any advice would be greatly appreciated!

dimbo61 · 14 March 2017 at 7:33PM

The best way is to overpay every month.
The more you can pay off the mortgage which you are paying interest on the better.

Emma_Louise · 14 March 2017 at 7:46PM

dimbo61 wrote: »

The best way is to overpay every month.
The more you can pay off the mortgage which you are paying interest on the better.

This doesn't help pay off the equity loan though as that isn't included in the mortgage payments and to pay off early the minimum you can pay is 10% each time. I'm fine with the mortgage payments and understand how to pay off the mortgage sooner, it's the equity loan that I'm not sure what our best option is

Futuristic · 14 March 2017 at 9:30PM

Yes you can remortgage if you have help to buy equity loan but the amount of lenders which offer HTB remortgaging is very little so probably best to use broker to get best rate.

Here's a good article on remortgaging htb and remortgaging to pay off equity loan:
https://www.homewardlegal.co.uk/blog/how-remortgage-help-buy-equity-loan

alex_163163 · 14 March 2017 at 11:21PM

Have you checked the HTB website FAQs yet? Don't know how much work you plan to do to the current property but this might affect your plans...... however if the work is just decoration and new kitchen/ bathroom then I think you'd be allowed to do this without permission.

Can I extend or alter the property?
Not without permission. Because Help to Buy is designed to help people move on to or up the housing ladder, you should consider repaying part or all of the Homes and Communities Agency’s contribution before making plans for improvements or alterations. This is because the Agency is seeking to help future aspiring buyers and may use the proceeds of these repayments to make more assistance available. Therefore, consent will not usually be granted for significant home improvements. The Post Sales Help to Buy Agent will act reasonably in considering any application and will review cases of hardship if, for example, property modifications are required for a disability.

When your property is sold in the future, if improvements have been made with the approval of the Post Sales Help to Buy Agent, these will be ignored when your property is valued to work out how much should be repaid to the Agency.

- See more at: https://www.helptobuy.gov.uk/equity-loan/faq/#sthash.h1Cuo7BT.dpuf

when you come to remortgage you also have to get permission from HTB to do so, at a fee! Have a read of the HTB FAQ page if you haven't already. Might help answer some questions for you.

alex_163163 · 14 March 2017 at 11:27PM

http://www.myfirsthome.org.uk

This is also a helpful website for HTB queries. There is a tarif of charges page that outlines the fees charged by the HTB company for remortgage, staircasing the loan etc.

kingstreet · 15 March 2017 at 6:45AM

Futuristic wrote: »

Yes you can remortgage if you have help to buy equity loan but the amount of lenders which offer HTB remortgaging is very little so probably best to use broker to get best rate.

Here's a good article on remortgaging htb and remortgaging to pay off equity loan:
https://www.homewardlegal.co.uk/blog/how-remortgage-help-buy-equity-loan

The number of lenders accepting remortgages with the HTB loan continuing is small. There is a much larger number which accept applications to repay the HTB loan.

OP - yes, you can remortgage and repay the loan and as dimbo has suggested, if you overpay your mortgage you are increasing the amount of equity you have in the property which will help you get a lower loan to value and better rate when you do.

dimbo61 · 17 March 2017 at 1:38PM

As Kingstreet has already pointed out you have two loans !
One is a Mortgage which you pay interest on and the other is Interest Free for the first five years.
So if you can overpay your mortgage by £500/£1,000 a month for the next 4 years you will be building up more equity in your home.
With luck your property might go up in value as well.
What you hope to achieve is a LTV of 80/75% at the end of the Interest free period so you can remortgage the property and incorporate the HTB loan into your main mortgage.
Easy for me to say but it takes carefully planning and being as MSE as possible.
We halved our mortgage in 4 years by offsetting and overpayments

silvercar · 17 March 2017 at 4:26PM

May be safer to save up the money and use it to repay the HTB loan after 5 years. Otherwise you will be paying hefty interest on that loan. Will save you more in the long term than reducing the mortgage now and having a high interest HTB loan in 5 years time.

dimbo61 · 17 March 2017 at 10:47PM

Interest on the HTB loan is for me the big worry.
It is Interest Free for the first five years of owning your home but then you start paying Interest.
This could be more or less than the interest you are paying on the mortgage for the other 75%
In 5 years time you want to put yourself in the best possible position so overpay the expensive part of the loan first !

moneytorques · 16 January 2018 at 2:52PM

Hi there, just came across your thread from last year, I too am interested in the option of some improvements so was wondering if youd followed through with your own successfully with the sanction of Help to Buy?

Thanks

Best ways to pay off Help 2 Buy equity loans?

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