What Happens at the End of Your Equity Loan?

Help to Buy: Equity Loan is a government scheme that provides homeowners who might not be able to purchase a property a bit of extra financial help. Often, when people are considering this scheme, they worry about repayment. That’s why our expert mortgage advisors have created this handy guide. We’ll explain what happens when you want to pay your equity loan back and what happens if you don’t pay it back before you sell your property or when the mortgage term is over.

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When do you pay back your equity loan?

As with any loan, it does have to be paid back, but there aren’t any strict, short term timescales in place. In fact, you can pay the loan back in full or in part at any point. However, the following circumstances will require the full repayment of the loan.  

  • You have reached the end of the equity loan term, usually 25 years. 
  • You have paid off your mortgage. 
  • You are selling your home. 
  • You have broken the terms of the contract. 

How to pay back equity loan.

The way you pay back your equity loan will depend upon your situation. There are 2 options open to you. 

Selling your home.

It’s common for people to wait until they sell their home to pay back the equity loan. Repayment will also be necessary if you have paid off your mortgage. This method involves paying only the mandatory interest payments during the loan term, then paying the loan back in full using funds from the sale. 

Staircasing

Some people want to make payments towards the loan before they sell up, even if these repayments are smaller. This method of repayment is called staircasing. This way, you own more and more of the property’s equity over time. 

Still confused?

If you’re still not sure whether the scheme is right for you, it’s worth contacting a government appointed Help to Buy agent. They’ll be able to talk you through the ins and outs of the scheme. Once you go ahead with it, they’ll be responsible for setting up the loan and any payments. They’ll also arrange for you to receive a regular statement about your loan to keep you informed.  

Emma Jones

Emma began her career in Lloyds Banking Group, first in the unsecured loans department at HSBC and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the the banks let their customers down by denying loans and mortgages.

Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money.

Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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