The Government launched Help to Buy equity loans to mortgage applicants back in 2013. The property market had to get prolonged to recover from the credit crunch. This was one of many schemes designed to give it a boost. The interest-free period of the equity loan was for five years. So many of these are now due for repayment to avoid interest accumulating.
If your five-year period is ending soon or has already ended. We recommend you should consider speaking to a local Mortgage Broker in Leeds like us. Who may be able to reduce your monthly payments or re-organize your finances.
The scheme works by the Government typically loaning the applicant up to 20% of the property’s value. There is no interest payable for five years. If the property increases in value, then the amount you owe to the Government increases also. So in that instance, the zero % could be quite misleading to some people.
The buyer is only required to put down a 5% deposit, and that is what made the scheme so famous.
From our experience of Help to Buy, many borrowers are unsure of what they signed up to when they bought the house. Maybe it’s down to the scheme not appropriately explained to them, or they got a little carried away with the excitement of purchasing a home. Either way, it comes as a nasty shock when the letter arrives, asking what action you intend to take to repay the loan.
The Government owns a percentage share in the borrower’s home. The borrower has 25 years to repay the loan unless they sell the house beforehand. At the end of the interest-free period, the interest gets charged at 1.75% in year six should the borrower not repay the loan at that time. The interest rate then goes up each year after that.
When the interest repayments kick in, some customers may struggle to keep up their payments. Most customers look to try and Remortgage in Leeds at some point.
Not all lenders will accept remortgaging applications from Help to Buy in Leeds customers. There are restrictions on the maximum loan to value when raising the capital to repay an equity loan. Some Lenders can consider going up to 95%, however. The significant advantage of repaying the equity loan in full is that any future increase in the value of the property will be 100% to the homeowner’s benefit and won’t be shared with the Government any longer.
If a Lender cannot get found who will lend you the full amount to repay the Government loan. When you come to remortgage, then another option could be “staircase”. When you gradually pay off the loan in installments over some time. Thus reducing the percentage of your home the Government owns. You can see the only staircase in multiples of 10%.