Help to Buy ending soon as five-year anniversary looms for past borrowers.
Those who used the government’s Help to Buy mortgage scheme could be hit with expensive fees on their mortgages as they come to the end of their five-year interest free period in a few months’ time.
The Government supported equity loan scheme, which is reaching its five-year anniversary, allowed buyers to make use of a five-year interest-free loan from up to 20 per cent of the value of a property to help get on the housing ladder.
These loans are now maturing, and customers will need to start paying rising fees on these equity loans or come up with another plan.
After the five years is up, borrowers must pay a fee of 1.75 per cent of the value of their loan, increasing each year by Retail Price Index plus 1 per cent, unless they can pay the loan off – usually by remortgaging.
What is the help to buy scheme?
The Help to Buy scheme only applied to new build homes, and mortgage brokers and other experts are warning customers that they may be left paying expensive fees if they do not have the equity left in their homes to remortgage.
New build homes can often be overpriced, and don’t always increase in value at the same speed as other homes. This is going to be a big problem for many and there will be the need for them to seek professional advice in dealing with the situation.
Most Help to Buy customers appear to have their mortgages with either the Nationwide or Halifax.
One likely option is to remortgage but only if there is sufficient equity in the property.
There are lending options available that may help ex-Help to Buy mortgagers to remortgage up to 95% Loan to Value, and therefore this should be investigated with a professionally qualified mortgage adviser. Standard mortgage assessment and affordability calculation, through the underwriting processes, will likely apply.
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The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of Mortgage Finder.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE