TMA Club is urging advisers to begin proactively consulting clients who are coming towards the end of their government equity loan as part of the Help-to-Buy (HTB) scheme.

The government-backed initiative has supported hundreds of thousands of first-time buyers (FTBs) take their first steps onto the property ladder, with over 200,000 properties purchased via the scheme since it first launched in 2013.

As those that took out the loan in late 2013 and early 2014 are nearing the end of their initial five-year period, TMA is encouraging advisers to ensure they are aware of the various options available to their clients.

One of the suggestions put forward by TMA, which will work particularly well for those properties that have increased significantly in value, is to remortgage the original loan and the equity loan into one new mortgage. Another alternative would be for homeowners to remortgage their existing mortgage and start to repay the interest on the equity loan – commonly referred to as a ‘Help-to-Buy remortgage deal’.

However, if remortgaging the original loan is not a viable option, customers can refinance the equity loan with a second charge and potentially remortgage the original loan and second charge at a later date, for example when out of an early repayment charges (ERC) period.

A further option for homeowners is to repay some or the entire equity loan via their savings – also known as ‘staircasing’. While this will prevent homeowners from paying a significant amount of interest, advisers must ensure that customers opting for this method are aware of restrictions, such as only being able to repay a minimum of 10 per cent of the property’s current value. Clients also have the option of remortgaging the original loan to secure a better deal.

Commenting, TMA senior product and business manager Rob McCoy said: “The Help-to-Buy scheme has undoubtedly been instrumental in helping many borrowers take their first steps onto the housing ladder.

“However, starting to repay the monthly interest on the equity loan after the initial five-year period is a detail often overlooked by many and we are increasingly beginning to hear that consumers don’t understand the implications of this. This is why we’re encouraging advisers to contact those clients who could be, or are soon to be, affected. This is particularly important for borrowers whose finances may look very different to how they did five years ago.

“Uncertainty on next steps needn’t be a problem – there are plenty of avenues that borrowers can take to secure the best deal with this accumulation of interest. It’s in an adviser’s best interest to ensure their clients are well-advised to take the best possible route for them and their circumstances.”

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