Help2Buy Equity Loan. Anyone here tell me experiences once the 5 years is up?

[IceCreamSunday87]

Just that really.
My husband and I have 2 small children and are looking to buy our first home. We are looking into the government help to buy 20% equity loan, where we put down 5% and the government put down remaining 20% deposit.
Our Mortgage advisor has said after to the 5 years are up, we remortgage to release equity to pay off the loan. I am warey as surely our mortgage will be bigger once we've done that?
Has anyone done this, then remorgeged after the 5 years? We're you worse off got it?
Thanks for reading.

Typo's *Were you worse off for it

Typo's *Were you worse off for it?

Anyone?

We have done it. Coming up to the five years next month. We were going to remortgage and take on the loan amount to pay it back, but a surprise pregnancy means we’ve put the house on the market instead. The way we looked at it, it basically meant we weren’t paying interest on 20% of the house for 5 years, and we’ve over paid the mortgage to the amount it would cost us if we took on the equity loan amount next month, so it wouldn’t have been a jump to us as we’ve been used to that amount going out for 5 years anyway. Plus overpaying means we would have a better LTV when remortgaging. It’s worked out really well for us so far.

I haven't done it but thinking about numbers, it's important that you don't overstretch yourselves. When it comes to remortgaging in 5 years, you'll need to have earnings high enough to obtain a bigger mortgage. Also, as I understand, if your house goes up in value, you'll need to pay back 20% of the higher value.
Overall, I would only do it if you're struggling to save for a deposit while renting + your repayments will be very manageable allowing you substantial overpayments or savings.

what if in after 5 years you cannot afford to remortgage?

also - if they value decreases, do you still have to pay back the original 20% to the gov, or does it go on the sale price?

You don't have to pay it back in 5 years....it's an interest free loan for 5 years and after that you pay interest on it (to the Govt effectively).

You can make payments towards it if you want to, but you don't have to.

Unless you choose to make payments back towards it then you don't pay it back until you sell your home, at which point you have to pay it back from the proceeds.

also - if they value decreases, do you still have to pay back the original 20% to the gov, or does it go on the sale price?

You have to pay the amount you took as a minimum irrespective of whether the house has decreased in value (same as a mortgage).

If you can't afford to pay it back you have the option to pay interest or sell the house and use the equity to buy something else.

We went in to it with £12.5k and with an increase in value plus paying off the mortgage we had £80k in equity after 5 years. We sold and took the money and bought something else (bigger house).

It worked out really well for us.

I don't think you do have to pay back the value you borrow regardless. It's 20% of the value when you pay it back so that can be more or less than you originally borrowed.

It's the greater of the amount you borrowed or 20% of the value of the property.

We used one to get on the ladder, then scrimped as though we were still saving for a deposit to repay it. It was great as we could build equity while saving.

But, when I was on the phone with them sorting the repayment out, the chap was telling me how many people use it to buy a house they'd never otherwise be able to afford, and who are then stuck with bad mortgage deals and ongoing interest payments because static house prices mean they can't afford to release the repayment, never mind move up the ladder.

@Sunshinegirl82 you are wrong. You still owe the amount you borrowed even if you sell you home for less than you bought it for.

People do struggle here to resell their new builds for more than they paid and I'm in the SE commuter area. It's just new builds, are a bit over priced and the shine soon fades after a few years. I do love my new build though.

@supertruck are you sure? See page 17

www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-Feb-2018-FINAL.pdf

We sold our new build for £60k more than we bought it for, also SE.

It does get expensive if you can't repay it after 5 years. Probably not the best move to put youself in that position.

We sold ours for £250 more then we brought it for, the government did take 20% of that increase..but even still

Of course should say £250k

@Sunshinegirl82 I don't have experience, but I think it's very hard to sell for less than you bought for due to the evidence situation. It would be interesting to hear from someone that has.

Most houses here ( I'm on a large 6 year new build development ) They sit for ages and the ones that sell have had a lot of extra money spent on them, but then sell for what they paid for them. This might improve now most of the houses are built and the development is nearly finished.

The terms of the help to buy arrangement provide that you repay the same percentage of the value of the house when the repayment is made as when the loan was taken out (for most people this will be 20). This could be more or less than the original loan made to you. Therefore you don't owe the full value of the loan back even if you sell for a lower figure.

When selling the price agreed has to be approved as "market rate" by an independent surveyor. This obviously stops people selling to their mum or a friend for peanuts in order to reduce their liability under the help to buy.

In reality it is unlikely that a property will drop in price significantly (or at all) without a major economic down turn being at play. Nevertheless the obligation is to re-pay the percentage and so it's possible (although I accept unlikely in practical terms) to end up paying back less than you borrowed.