Remortgaging to Repay Your Help to Buy Equity Loan: A Practical Guide
In summary
If you bought your home through the Help to Buy equity loan scheme, you were part of a large group of first-time buyers who benefited from this government-backed initiative to step onto the property ladder. As the interest-free period ends or your current mortgage deal comes to a close, many homeowners begin exploring the option of remortgaging to repay the equity loan. Here’s a clear, step-by-step guide to help you through the process.
Understanding the Help to Buy Equity Loan
The Help to Buy scheme enabled buyers to borrow up to 20% of the property’s value (or 40% in London) from the government, with no interest charged for the first five years. After this period, interest begins to accrue, and the loan must be repaid either when you sell your home or after 25 years—whichever comes first.
Benefits of Remortgaging to Repay the Loan
Choosing to remortgage in order to repay your Help to Buy equity loan can offer several advantages:
- Increase your share of ownership in the property.
- Avoid escalating interest charges on the equity loan.
- Access more competitive mortgage deals thanks to a lower loan-to-value (LTV) ratio.
How to Remortgage: Step-by-Step
- Consult a Mortgage Broker like myself A broker can help you navigate the market, compare remortgage deals, and determine whether you can borrow enough to repay the equity loan, discuss affordability, and total costs etc. You may be able to stay with your current lender and apply for a further advance or switch to a new one via a remortgage.
- Arrange a Property Valuation Start by obtaining a valuation from a RICS-accredited surveyor. This valuation determines your home’s current market value, which is crucial since your repayment amount is based on the property’s present value—not the original purchase price.
- Make the application to Homes England Before proceeding, you must obtain permission and a settlement figures from Homes England. You’ll need to submit: - A redemption statement from your current lender. - The RICS valuation report. - Details of your new mortgage offer and acting solicitor
- Appoint a Conveyancer Legal support is essential to manage the repayment of the equity loan and register your new mortgage. Your conveyancer will coordinate with Homes England and handle the necessary paperwork.
- Finalise the Remortgage Once everything is approved, your new lender will release the funds to repay the equity loan. You’ll then begin repayments under the terms of your new mortgage.
Some important considerations
- Costs: Be prepared for valuation (RICS valuation), legal, and lender fees (subject to product).
- Property Value: If your home has decreased in value, remortgaging to repay the loan may not be feasible. Timing: Ensure your application is made asap after receiving the redemption statement as there is a time limit on the settlement figure.
Conclusion
Remortgaging to clear your Help to Buy equity loan can be a financially savvy move, especially as interest charges begin to accumulate. With the right guidance and preparation, you can take full ownership of your home and potentially reduce your monthly outgoings.
If you would like help and advice with clearing your help to buy please feel free to contact me.
Important Information
This post provides general information and does not constitute personal financial advice. For guidance specific to your situation, please seek regulated mortgage advice. Your home may be repossessed if you do not keep up repayments on your mortgage.
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