Homeowners with Help to Buy mortgages warned of five-year ‘ticking timebomb’

'When the five-year interest free period comes to an end people are being met with a very nasty surprise'

Wednesday, 7th April 2021, 4:41 pm
Updated Wednesday, 7th April 2021, 4:42 pm
LillyBrooke director James Schofield
LillyBrooke director James Schofield

Homeowners across Northamptonshire who took advantage of the government's Help to Buy mortgage scheme face ‘payback time’ - with expensive fees on their loans looming once their five-year interest free period ends.

The controversial equity loan scheme allowed buyers to make use of a five-year interest-free loan from the government of up to 20 per cent of the value of a property, enabling thousands of families to get on the housing ladder.

However, as these loans mature, customers face having to pay rising fees on these equity loans or come up with another plan.

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After five years is up, borrowers must pay a fee of 1.75 per cent of the value of their loan, increasing each year by the Retail Price Index plus one per cent, unless they can pay the loan off, usually by remortgaging.

Northampton-based financial services company, LillyBrooke, has teamed up with Franklin’s Solicitors to offer a way out for homeowners concerned they may not be able to make the payments.

LillyBrooke director James Schofield said: “For many, the Help to Buy scheme was a very attractive way of getting onto the property ladder but the reality is it’s a ticking timebomb. When the five-year interest free period comes to an end people are being met with a very nasty surprise.

“Having purchased a new build property myself in 2017, I’m pretty sure that if I didn’t do the job I do I would have little understanding of what is going to happen to my monthly payments in the sixth year.

“Explanations by the equity loan management company were vague and there’s very little information online. There’s a lengthy and very complex 29-page document on the Government website for customers to try and figure it out but it’s far from obvious.”

The Help to Buy scheme only applied to newbuild homes, and customers may be left paying expensive fees if they do not have the equity left in their homes to remortgage, especially since newbuild homes don’t always increase in value at the same speed as other homes.

The process to remortgage is complicated and time consuming, requiring the customer to contact banks and building societies and shop around for the best available rates before getting in touch with solicitors, surveyors and the Help to Buy scheme and managing the entire process themselves.

LillyBrooke and Franklin’s Solicitors have launched a new service where they will manage the whole process and the customers will have one single point of contact, their own dedicated case handler.

The advice and broker application fee is free of charge, with the customer then able to pay off the Help to Buy equity loan by switching lenders and increasing their current mortgage amount to cover both the existing mortgage and the equity loan.

Mr Schofield said: “Many homeowners will have suffered financially during the pandemic. The last thing they need as we emerge from lockdown is an unwanted hike in their monthly mortgage repayments.

“We’re here to help people stay in their homes and give them the financial freedom to get back to enjoying life as soon as restrictions allow.”

For more details and a free, no obligation quote, call 01604 926212, email [email protected] or visit www.lillybrooke.co.uk