There are lots of schemes available to help first-time buyers take that all-important step onto the property ladder. One of these schemes is Help to Buy, which gave prospective buyers an equity loan and allowed them to put down a deposit of just 5%. Although the scheme closed in 2023, many people still have a Help to Buy loan.
What is the Help to Buy scheme?
The Help to Buy scheme was introduced in 2013 and underwent several amendments. It consists of several components, including the equity loan scheme, Help to Buy: ISA, Help to Buy: shared ownership, and mortgage guarantee.
The Help to Buy ISA scheme helped first-time buyers to save for a deposit by providing a government bonus: for every £200 saved, the government contributed £50, up to a maximum bonus of £3,000. Shared ownership allowed buyers to purchase a share of a property (usually between 25% and 75%) and to pay rent on the share they didn’t own. Over time, buyers were able to increase their share in their property in a process known as ‘staircasing’ until they owned the property outright.
Is the Help to Buy loan repayable if the property is sold?
A Help to Buy loan is typically repayable if you sell the property. The amount repaid will be a percentage of the property’s current market value, corresponding to the percentage of the original loan.
What happens when the end of the loan term is reached?
The Help to Buy loan is interest-free for the first five years. After this period, you will be required to start paying interest on the loan. The loan term is typically 25 years. If you haven’t repaid the loan by the end of this term, you will need to pay back the outstanding balance.
Can you make voluntary repayments?
You can choose to make voluntary repayments at any time, either in full or in part, without incurring a penalty. This can help to reduce the overall amount owed and potentially lower future interest payments.
You can find out more about what is involved in the Help to Buy loan repayment and obtain professional help from companies such as https://www.samconveyancing.co.uk/news/conveyancing/help-to-buy-repayment-after-5-years.
Look carefully at the terms and conditions
It is important to review the terms and conditions of your Help to Buy loan agreement, as there may be variations depending on when and where the loan was taken out. It is also important to seek advice from a professional to provide clarification on the repayment terms and your options.
