Equity home loans

[Lolalime]

We took out an equity home loan 10 years ago to buy our home. Due to several reasons, we were not able to look into redeeming the loan sooner than now.
If we redeem it now, we repay double the original amount as our house price has also doubled.
If we wait, we could pay even more.
AIBU thinking this is a trap? How does the average person ( those most likely to take these types of loans) afford to keep up.

Equity loans are a massive con. You might as well just sign your house away.

I'm not sure how it is a trap, although it is pretty crap. Surely the interest rate/amount repayable etc was explained to you when you took the loan out?

@HilaryBriss

I'm not sure how it is a trap, although it is pretty crap. Surely the interest rate/amount repayable etc was explained to you when you took the loan out?

This. It's shit, but you signed the contract.

Yes I read and signed the contract but was told London’s housing bubble had crashed and would not see the same growth any time soon.

It’s not a trap. They’re often taken out by old people and the equity is paid back from the property sale when they die. It’s really a loan of last resort. You must have been warned that the market could rise as well as fall?

It’s a debt trap. I’m just wondering how anyone else is managing with the scheme.

Sorry I wasn’t clear , it’s a first time buyer equity loan for key workers, later extended to everyone.

The house value increase is meant to cover the loan when remortgaging. Yes the loan is bigger if house is worth more but you own a larger share than the loan

You’ve benefitted from this product as if it hadn’t been available you most likely wouldn’t have been able to afford to buy at all.

Not a trap.

In 10 years, the value of your house has DOUBLED. That’s a lot of money.

So even with the larger loan repayment, you’re quids in.

TheGoogleMum Thank you , this has made me look at it in a more positive light! X

You are meant to take account of rising equity to remortgage and repay the equity loan. If you hadn't had the equity loan, you wouldn't; have been able to buy your house, which has doubled in value. I don't think you are in a bad position tbh.

As to how average people afford to keep up... planning. A plan for repaying it at the start, continually reviewed.
Of course, that can come unstuck - life throws its curveballs.
But for some people, the plan is assuming they’ll have pay rises. For others, they’ll be setting aside money (or overpaying it along the way if allowed).
For many, the answer is that they will later be able to get a mortgage at a much better LTV rate (because of the house price increase) which means they remortgage to pay off the loan.
Or cash out what you’ve made in the house price doubling and move somewhere cheaper, paying off the loan that way.

It's not a trap at all! We had one which meant we could buy our house at 24 and save all the money we would have spent if we rented. Sold our house, paid off the loan and used the equity to buy another house. We would never have been able to buy if we hadn't done that.

OP, I would wait a bit, can't you just pay it off when you sell instead? We didn't even notice the loan really.