The help to buy scheme was launched in 2013, offering 1st buyers and second steppers a way to get on the property ladder with just a 5% deposit. The government would own up to 40% of the property, for a new-build worth up to £600,000.
For those who took a help to buy loan when the scheme was launched 5 years ago interest repayment became due this year! For the 1st five years the government just charge a £1 admin fee, but after five years they want their money back so commence collecting interest in the funds. The starting rate is 1.75%; rising each year by 1% above the base rate/ inflation. This could cause some problems, for many who used this scheme they will be paying their mortgage and service charge and no this. For someone who borrowed £240,000, it would cost an extra £4,200 this year.
For what are the options? Well ideally you want to pay back the government to avoid this extra interest. You can pay back by re-mortgaging, if you have sufficient equity and high enough earnings. Or, you can buy back your property in stages and pay the interest in the meantime. But for many who can’t afford to do this, they will be forced to sell their home to re-pay the loan. If your home has increased in value and there for you have now managed to acquire a good-sized deposit buying a new property should be achievable without the government loan.
If you choose to re-mortgage, we can put you in touch with a financial advisor to look at the options available. The Skipton Building Society offer loans of up to 90% to assist those buying back their home from the government.
If you choose to sell your home please get in touch, we have a wealth of experience dealing with help to buy sales and can advise on the process and offer advice on the best route forward.