If you’ve bought a home using the Help to Buy scheme, at some point, you’ll need to consider how to repay the equity loan. Whether you’re approaching the end of your interest-free period or planning a move, understanding the repayment process is crucial. The good news is that there are several ways to repay the loan, each with its own considerations. Let’s break down the options available and what you need to know about repaying your Help to Buy loan.
The key stages of repayment
The first step in repaying your Help to Buy loan is knowing when and how much you owe. If you’re within the first five years, the loan is interest-free, which is a great financial cushion. However, from year six, you’ll start paying interest at 1.75%, increasing annually by the Retail Price Index (RPI) plus 1%. If you’re nearing this point, it’s a good idea to think ahead about your repayment options.
You can either repay the loan in full or in part. Repaying it in full involves settling the entire loan amount based on the current market value of your home, while partial repayment, or “staircasing,” allows you to pay off 10% or more of the loan at a time.
Remortgaging and selling your home
Many homeowners opt to remortgage as a way to repay their Help to Buy loan. This involves switching to a new mortgage deal that covers the loan repayment in addition to your existing mortgage. However, keep in mind that remortgaging can come with additional costs, and you’ll want to ensure it’s the right financial move for you.
Selling your home is another common option. If you decide to sell, the loan will be repaid as a percentage of the sale price. The amount you owe will depend on the value of your home at the time of sale, so if your property has appreciated in value, you’ll owe more than you initially borrowed.
Understanding the costs involved
It’s important to remember that repaying a Help to Buy loan isn’t just about handing over the money. You’ll also need to consider various fees, including valuation fees and legal costs. For instance, seeking advice on help to buy repayment solicitor fees early on can save you from unexpected surprises during the repayment process. Working with a solicitor will help you navigate the legal side of things, ensuring that everything goes smoothly.
A clear path forward
Repaying your Help to Buy loan might seem like a daunting task, but with careful planning, it doesn’t have to be overwhelming. Whether you choose to remortgage, sell, or staircase your way to full repayment, knowing your options will help you make informed decisions. Make sure you stay on top of any changes to your property’s value and keep communication open with your mortgage lender and solicitor to avoid any pitfalls along the way.
Ready to take the next step?
Now that you’ve got a clearer picture of how to repay your Help to Buy loan, it’s time to take action. Whether you’re preparing to remortgage or thinking about selling, making informed decisions can help you manage the process smoothly and avoid unexpected costs down the line. Be sure to get the right professional advice to ensure you’re on track for a successful repayment.
