Borrowers who took out Help to Buy equity loans at the launch of the scheme are being urged to consider ‘staircasing out’ before interest payments kick in.
With the five-year anniversary of the initiative looming, now could be the right time increase borrowing in order to repay the loan, Skipton Building Society has advised.
Help to Buy equity, launched in April 2013, provided buyers of new-build properties with a loan of up to 20% towards their deposit.
While the loans were interest-free for the first five years, after this time borrowers would begin paying fees starting at 1.75% and rising in line with the Retail Price Index plus 1%.
An important factor to consider is that repayments on the loan will rise or fall in line with the property market. With house prices growing at an average rate of 25.5%, according to UK Finance, there is even greater incentive to review the options.
Kris Brewster, Skipton’s head of products, said: “Property prices have generally increased over the last five years and may continue to grow. Consideration to buying out the equity loan may be worthwhile.”
He added: “Homeowners may wish to consider the long-term benefits of exciting their Help to Buy mortgage bearing in mind the interest payments on the equity loan will rise and by paying off the loan early, homeowners can lock in the benefit of any future house price growth.”
Skipton has recently launched a range of “Hexit” products which could be considered by borrowers considering paying off Help to Buy equity loans.
They include two, three and five-year fixed remortgage loans with £1,000 cashback to help with increased legal and admin costs, which could be incurred repaying the Government equity loan.
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