Help to Buy Mortgage | It is never too late

Help to Buy Mortgage | It is never too late

Help to buy mortgage equity loans can be explained as government helping first-time buyers with funding the deposit. HTB Equity loan is usually 20% of the property value and the applicants only need to contribute a deposit of 5%. However, the current HTB Equity Loans are available to first-time buyers as well as homeowners planning to move there homes. The property you are planning to buy must be newly built with a price tag below £600,000.

The critical factor is the Help to Buy scheme for first-time property buyers is going to end in March 2023 as announced by the UK government in 2018. A new face of the Help to Buy mortgage equity loan will kick start from 1 April 2021 until 31 March 2023.

They are trying to make sure that the scheme is well directed towards the home buyers who are really in need of it. The key changes are:

  • Help to Buy equity loans will only be available for first-time buyers. defined as those who haven’t previously owned or purchased property.
  • HTB Equity loan will introduce regional property price caps based on regional markets. It will set the maximum price of a new build home that can be bought with Help to Buy in any region.

Downside of Help to Buy mortgage Equity Loans

There are major disadvantages of Help to Buy Equity loans when it comes to refinancing your property. You can find the best solutions for these issues by obtaining advice from an experienced mortgage broker who is into fin-tech and digitally driven advising. The disadvantages can be listed as below,

#01 Valuation of the property

The repayment of the Help to Buy equity loan is always based on the current valuation of the property. For example, if you purchased a property valued at £600,000 with a 20% government equity loan, when you need to redeem the equity loan you will have to pay 20% of the on-spot valuation of your property. This can be costly in case the property valuations have gone up. Considering the property market during the pandemic, it is unlikely that the valuations could go up. Therefore, equity loan holders have a very good chance of redeeming their equity loans at a lower valuation. The HTB valuation needs to be accepted by the Help To Buy Authority. A professional value would be able to help you with this course at a valuation fee of around £400-£500.

#02 Interest charged after 5 years

The first five years of your Help to Buy equity loan would be interest-free. Thereafter, the government starts charging you interest. This is one of the major reasons why applicants try to redeem their equity loans before five years. Otherwise, they have to pay interest to both the mortgage lender and government for the equity loan. Even-though the HTB schemes are intended to provide the home buyers with the real essence of help, well it is quite arguable after 5 years time where you have to pay interest on the equity loan! As per the best mortgage protection advice, the best practice is to settle your equity loan before five years!

#03 No Debt consolidation

If you are planning to remortgage/refinance while having an equity loan scheme in the background, you are restricted from additional borrowing opportunities. You will not be able to take cash out of your mortgage for debt consolidation such as to settle your other loans, hire purchases, etc. This is one of the major drawbacks of equity loan schemes as it affects the additional fundraising capability of the borrowers even if you have a good credit score.

#04 Lot of lenders do not remortgage properties with HTB Equity Loans

There are only a handful of lenders who are happy to accept remortgage applications for homeowners having help to buy equity loans in the background. These applicants will not be able to apply for the cheaper rates in the market. they will rather have to do continous product switches with the same lender and pay high-interest rates (relatively not higher as expat mortgage rates) until they can redeem their equity loan.

One probable solution for this matter is your existing lender can help you raise extra cash to redeem the equity loan provided that your income is adequate. On the other hand, it is really hard to make the mortgage affordable with a new lender even if you are redeeming the equity loan by taking cash out of the mortgage.

Contacts us for more articles!

Leave a Reply

Your email address will not be published. Required fields are marked *

Share via
Copy link
Powered by Social Snap