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If your property has increased in value, you could consider releasing some cash to pay o some or all of your equity loan by remortgaging.
When doing your calculations, remember that you could well be paying o more than you borrowed, as the loan is a percentage of the property’s current market value rather than the amount of cash that you originally borrowed.
This means that if your equity loan was for 20% of the property value and your home has increased in value by £20,000 in the past five years, you’ll be paying the government an extra £4,000. You’ll also need to factor in legal and valuation costs, and will need to seek permission from the post-sales Help to Buy agent.
Once your interest payments kick in, you’ll need to start paying a fee of 1.75%, rising each year by any increase in the Retail Prices Index (RPI), plus 1%. This could add a significant chunk to your monthly outgoings.
If you’ve enjoyed significant price growth or your circumstances have changed, you might be ready to make a move elsewhere – perhaps into a larger home.
In this scenario, you could sell your home and repay o the equity loan in full.
Whether you should do this depends on your personal plans and the local property market. Settling the loan could wipe out your equity, preventing you from progressing up the property ladder outside Help to Buy.
At the end of January, Skipton Building Society launched a new range of remortgage products for Help to Buy users who want to pay o their equity loans.
The deals, which are being dubbed ‘hexit’ mortgages, allow borrowers to use increases in the value of their home to pay their equity loans o in full.
Similarly, Leeds Building Society is offering a new deal with £1,000 cashback for Help to Buy homebuyers and remortgagers, though this deal is only available through mortgage brokers.
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