Ready to pay off your Help to Buy Loan?

If you have been a participant of the Help to Buy Equity Loan scheme, you may be wondering what the next steps are after the five-year interest-free period ends. In this blog, we'll walk you through the steps on how to redeem your Help to Buy loan.

First, let's clarify what the Help to Buy Equity Loan scheme is. It is a government scheme aimed at helping first-time buyers and home movers to purchase a new build property with only a 5% deposit. With the scheme, the government lends you up to 20% of the cost of the home (40% in London). The equity loan is interest-free for the first five years, after which you are required to pay interest on the loan.

The scheme ends on 31^st March 2023 so you can no longer apply for it, however if you have a HTB loan already, then this blog is for you….

Now that you know the basics of the scheme, let's move on to how you can redeem the loan after the five-year interest-free period.

1. Get a property valuation

Before you can redeem your loan, you'll need to have your property valued. This valuation will determine the current value of your property, which will affect how much you will need to repay. Target HCA, who are the company that operate the HTB scheme, will only accept a valuation from a RICS (Royal Institute of Chartered Surveyors) accredited valuer.

2. Contact the Help to Buy agent (Target)

Once you have your property valuation, it's time to contact the Help to Buy agent. The agent will give you the current redemption statement and the current interest rates. Make sure that you have your last mortgage statement and your property valuation to hand.

3. Decide how you want to repay the loan

You have two options when it comes to repaying the Help to Buy loan:

- You can repay the loan in full, which means that you'll own the property outright without any government assistance. You can do this by paying off the loan with savings or by raising the capital on your mortgage to clear the loan.

- You can choose to extend the loan repayment period. However, this will mean that interest will be added to the loan, and you'll have to start making interest only repayments on the loan each month. The full term of the loan if you elect to do this will be a maximum of 25 years and you will only be repaying the interest accrued and not the overall balance of the loan.

4. Finalise the repayment

Once you have decided how you want to repay the loan, you'll need to liaise with your mortgage provider to finalise the repayment. Your mortgage provider will require documentation such as the current valuation report and your redemption statement. (Its worth noting that a good mortgage broker will assist you from the beginning of the process and liaise with Target HCA on your behalf as well as recommending a good solicitor who is set up to handle the re-mortgage and HTB redemption)

Finally, just like that the process of redeeming your help to buy loan after the 5-year interest-free period is completed. You can now relax knowing that there are no longer any additional loans owing on your property other than your mortgage.

In summary, there are a few steps that you'll need to take to redeem your Help to Buy loan after the five-year interest-free period ends, and there are charges involved that you will need to pay to Target HCA and to your nominated solicitor in addition to having to pay for your own RICS valuation to be carried out. By following the steps outlined above, you can ensure that everything runs smoothly and that the process is completed efficiently.

 If you have any questions about the redemption process or want to know more about the Help to Buy Equity Loan scheme, don't hesitate to contact your local Help to Buy agent for additional guidance or your mortgage broker who will guide you through the process in more depth.