The Help to Buy scheme was launched by the government in April 2013 to help people get on the property ladder. It allowed homeowners to borrow up to 20% of a property value, on top of a normal mortgage; interest-free for the first five years after which interest would become payable. If you are one of the homeowners who took advantage of the scheme five years ago, interest will now be payable and you may be wondering what your options are.
What about your Help to Buy loan after five years?
After you’ve have had your Help to Buy loan for five years, i.e. from year six, you will have to pay interest at £1.75% and each year after that this rate will rise by the RPI (Retail Prices Index) measure of inflation, plus 1% until the loan is paid off. (The loan has to be paid off after 25 years). An example is as follows:
You bought a home for £200,000 with a Help to Buy equity loan of £40,000 (20%).
plus 1% (1)
|Annual interest fee +
You will only ever pay interest on the original loan amount. However, if you sell your property, you will need to pay Homes England (this is where your equity loan came from) the same percentage of the value at the time of sale as you originally borrowed. So, if house prices have risen and your home is now worth £250,000, you’ll owe £50,000 as 20% of the property’s value, BUT interest will still only be charged on the original £40,000.
Please bear in mind that this interest payment will be in addition to your normal mortgage repayments for the remaining mortgage term.
What are your options?
- You can re-mortgage your property to borrow enough money to pay off the Help to Buy mortgage.
- You can keep things as they are and pay the interest.
- You can sell the property and move to a new home, but you will have to re-pay the Help to Buy loan in addition to the normal mortgage secured on your home.
If you re-mortgage or sell your property, legal work will be involved and Graysons can help you with that. We have the legal expertise and experience to guide you every step of the way, making sure things run as smoothly as possible. Contact us on the telephone number or email address below to discuss your own particular matter, or you can get a free, no obligation quote on our website.