Should I pay off my Help to Buy mortgage?
I have a Help to Buy mortgage — a £50,000 equity loan under the scheme together with a £150,000 mortgage on a property in England. Can I pay off £130,000 from the mortgage and then remortgage for the remaining balance of just £20,000, but leave my £50,000 Help to Buy loan outstanding as it’s interest free for a further four years? Is this sensible or not?
David Hollingworth, director at broker L&C Mortgages, says the Help to Buy equity loan — available in England, Scotland and Wales in various forms — has helped many people get on the ladder or make their next move to a new, possibly larger property over the years. As you live in England you will benefit from a Help to Buy equity loan of typically up to 20 per cent of the property value (or 40 per cent in London) on new-build properties, most recently only for first-time buyers. The purchase price is then made up through a minimum deposit of 5 per cent and a mortgage.
David Hollingworth, director at L&C Mortgages
As you say, the equity loan doesn’t charge any interest during the first five years. After that, a rate of 1.75 per cent is charged in year six, which then increases each year by the consumer prices index plus 2 per cent.
This story originally appeared on: Financial Times - Author:Lucy Warwick-Ching
