Paying Off Help to Buy
So, you've been living in your new help to buy property for some time now and you know that you have 5 years interest free on your Help to Buy scheme, but time's now running out and you’re thinking about what your next steps should be.
Many people have lost sight of the fact, or didn’t understand in the first place, that the Help to Buy scheme is not a loan in the traditional sense, It's a shared equity scheme which means as your property goes up in value, it will cost more to buy out the Help to Buy Scheme. The scheme is Interest free for the first 5 years, but then you have to begin paying interest, which is often the prompt for people beginning to think about buying out of their help to buy scheme.
It’s important to carefully consider all of your options when it comes to potentially paying off Help to Buy, so we’re going to break down what those options are to give you an idea of what’s best for you.
Option 1 : Do nothing!
After the first 5 years of your equity loan scheme, you begin to pay interest on the portion of your home which is effectively owned by the Help to Buy scheme.
When you reach this point, you will need to start making monthly payments to cover the interest, remember you are only paying the interest at that point and the amount of the Help to Buy portion will not be reducing.
If you do choose this option, remember that as the value of your home increases, the value of the share which was provided by the Help to Buy scheme will also increase in value which will result in you paying more when you do come to pay it off.
Option 2 : Partial buyout
If you want to buy out of the scheme but don’t think you can afford it or raise the funds to cover all of it, you have the option to pay off a portion of the equity share with a minimum amount of 10% of it.
In order to pay off part of the scheme, you will have to do so in one lump sum using either funds from savings or potentially money raised through a remortgage of the property.
Find out more about remortgaging help to buy here.
When paying any amount off of the equity share, you will need the property to be valued by a RICS certified property surveyor; there will be a cost for this which you will also need to cover.
To find out more about repaying some of your scheme, visit http://www.myfirsthome.org.uk/iwantto/redeem/
You will also need a solicitor to undertake the legal work for you, so you need to plan for those costs as well as the Help to Buy scheme fees which are currently £200.
Option 3 : Full settlement
This is the same process as option 2, only you will own the whole property once you have bought out the Help to buy scheme.
This means that you only pay the interest on the mortgage you have and not on the Help to Buy scheme providing you buy out before you reach the end of your interest free period.
With mortgage rates very low right now, it is likely that buying out could look favourable when compared to the costs associated with the Help to Buy scheme.
If you’re looking to raise some money to buy out of your Help to Buy Equity Loan scheme, we can save you time and money by comparing deals from the whole market to find the one that’s best for you.
Or if you just want a chat with an expert to get some advice on your personal situation, we’re always happy to help and won’t charge you a penny, call now on 01823 286 271.