Help to Buy borrowers in Greenwich, Wokingham and Dartford are in the best position to pay off their equity loan and still benefit from capital gains when moving, new research has found.
In contrast, those in County Durham, Stockton-on-Tees and Rochdale have seen much more modest house price growth, and as such face repaying loans that are larger than the capital gains earned in the past five years.
The Help to Buy equity loan scheme began in 2013 and original users will start to incur interest on their loans this April, providing motivation for them to move up the property ladder.
Borrowers in the scheme must repay 20% of the property value at the time of selling, rather than the original loan, so independent mortgage broker Private Finance has looked at who is in the best position to do so.
The third best area is Bristol, followed by central Bedfordshire, Bedford, Horsham, the Test Valley, Colchester and then Cherwell.
The rest of the worst areas are Sunderland, Doncaster, Barnsley, Stoke on Trent, Chorley, Wolverhampton and St Helens.
According to Shaun Church, director of Private Finance, many Help to Buy home owners will have experienced significant house price growth since they first took out their loan, but it’s a postcode lottery as to how much they will have left to play with once their equity loan is repaid.
‘While most have done very well out of the scheme, our research shows that buyers in some areas, particularly in the North, are at risk of the amount they must repay outweighing their capital gains,’ he explained.
He also pointed out that there are also challenges for those who want to stay in their Help to Buy home but switch to a different mortgage deal, as not all lenders under the scheme offer remortgage products.
‘Help to Buy home owners who are wondering what their next steps should be would benefit from seeking advice from an independent mortgage adviser who can explain their options,’ he added.
