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Help to Buy remortgage

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Help to Buy remortgage

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Last reviewed on 7th September 2023 by Martin Alexander (Mortgage Advisor)

If you used the government’s Help to Buy scheme and your deal is coming to an end, it could be an ideal time to remortgage. Although the loan is interest-free for the first five years, you’ll start to incur costs once this time period comes to an end. As a result, remortgaging your Help to Buy can save you money.

A Help to Buy remortgage can be straightforward with the right approach, but getting it wrong could result in you overpaying. Our specialists have access to exclusive rates and have a wealth of experience in this area. You can make an enquiry with a specialist to get started. We’ll then calculate which lenders are the most suitable based on your circumstances.

Can I remortgage if I’ve used Help to Buy?

Yes, remortgaging with a Help to Buy loan is possible with your current lender or a new lender. That being said, as Help to Buy was a government scheme, there’ll be terms and conditions attached to your mortgage. This may include restrictions for when you remortgage as the 20% you borrowed as part of the scheme will need to be repaid at some point.

If you simply wish to switch deals and move on to a better rate, the remortgage process should be straightforward. In comparison, there are certain conditions you must meet if you hope to borrow more. For instance, you’ll only be able to remortgage and borrow more money to:

  • Pay back all or part of your equity loan
  • Carry out a transfer of equity
  • Make structural changes to your home, with permission
  • Repay mortgage arrears, only in some cases

Do I need permission to remortgage my Help to Buy home?

You’ll need permission to remortgage before you can apply with a new lender, along with the following:

  • A redemption statement from your current lender – This confirms the amount outstanding on your mortgage.
  • A mortgage redemption statement from your mortgage provider – This will show you details of the equity loan and any outstanding payments.

Statements must be dated within 12 working days of your remortgage application.

Once you have permission, you’ll receive an ‘authority to proceed’ form. The permission granted is valid for six months so you’ll need to remortgage within this timeframe. Failing to meet this timescale may result in you having to apply for permission again.

How to get a Help to Buy remortgage

First, you’ll want to speak to a mortgage advisor, especially if you want to switch deals. This is so that an advisor can check that you’re eligible and then compare rates across various lenders.

What you’ll need before you apply

Before you make your decision, here are a few factors lenders will check before saying yes:

  • Do you have equity in your home?
  • If so, how much equity do you have?
  • Is your Help to Buy an equity loan or mortgage guarantee?
  • Permission from your equity loan provider

What checks will lenders carry out?

Lenders will also carry out their usual checks before mortgage approval, such as:

  • Individual applicant check – If you’re switching to a new deal with your current lender, they’ll simply review your payment history as they’ll already have this information on record. That being said, do inform them of any changes that happened after your mortgage.
  • Affordability – Lenders will check the amount you can borrow in relation to your income and spending habits. Furthermore, it’s important for lenders to check whether the new deal is affordable.
  • Credit check – You’ll undergo a credit check to ensure there are no major issues with your credit history.

ask a mortgage broker

Will I need to repay the equity loan when I remortgage?

Your equity loan will typically stay as it is, but switching to a new deal can save you money on interest payments. The only change that takes place is that your new mortgage will replace your existing mortgage.

Repaying some or all of your equity loan can improve the deals you’re offered. This is because you’ll need to pay interest on the loan after five years and it can increase your monthly payments.

Repaying your equity loan can have a positive effect on your affordability assessment as it reduces your monthly payments. Furthermore, you may find that you qualify for more lenders meaning that you’ll have more deals to choose from.

What if I’m in negative equity?

It’s not possible to remortgage while you’re in negative equity. When you initially took your equity loan, you would have paid a minimum 5% deposit. The remainder of the funds would have consisted of your mortgage and the government loan.

Mortgage lenders will only be prepared to offer you a new mortgage if you have equity in your home. If you’re unsure, you can ask our experts for help.

Can I remortgage to pay off my equity loan?

Yes, you’re able to pay off your equity loan at any time. You can also release equity with your remortgage to pay off part or all of the equity loan. That being said, you’ll be borrowing more against your property so your mortgage payments are likely to increase.

It’s recommended to compare the cost of the interest on the equity loan to the interest on the additional amount you’ve borrowed. You can then calculate which method is cheaper. Our advisors are also able to guide you on what would be the most cost-effective solution going forward.

If you choose to pay towards the balance of your equity loan, the minimum you have to clear is 10%. If you have enough equity, you can use the remortgage to pay off your entire equity loan. That said, you don’t need to repay your equity loan in full when you remortgage. As a result, you can pay off your equity loan slowly. This is known as staircasing.

Will it help if the value of my property has increased?

If your property value has increased and you’ve repaid your mortgage on time, then you should have ample equity. This can be very beneficial, especially when trying to maximise your remortgage for your Help to Buy home.

Three great ways to maximise the equity for your remortgage are:

  • Take a remortgage at 75% loan to value again and withdraw some equity
  • Remortgage to a lower loan-to-value amount
  • Pay towards the balance of your equity loan

What should I do to start my remortgage?

If you’ve used the Help to Buy scheme and need to remortgage then do get in touch. Our specialists have vast experience in this field and can search for the best possible deals you’re eligible for.

The advisors we work with can help even if you have unique circumstances such as poor credit or you’re self-employed. You may have even been declined by another lender. Don’t panic, our advisors are here to give you expert advice. You can make an enquiry below or call today.

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About the author

Martin Alexander
Senior Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.