Published 1st November 2018 · Updated 7th September 2023 by Martin Alexander
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 period ends. 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 overpaying. Our specialists have a wealth of experience in this area. You can speak with an advisor to get started.
Can I remortgage if I’ve used Help to Buy?
Yes, remortgaging with a Help to Buy loan is possible with your current or new lender. That said, as Help to Buy was a government scheme, terms and conditions will be 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 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
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 must remortgage within this timeframe. Failing to meet this timescale may result in you applying 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 your eligibility and 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 review your payment history as they already have this information on record. That being said, inform them of any changes that happened after your mortgage.
- Affordability – Lenders will check the amount you can borrow with your income and spending habits. Furthermore, lenders need 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.
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 is that your new mortgage will replace your existing one.
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 qualify for more lenders, meaning 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 can 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 said, you’ll be borrowing more against your property, so your mortgage payments will likely 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.
If you choose to pay towards the balance of your equity loan, the minimum you have to clear is 10%. You can use the remortgage to pay off your equity loan if you have enough equity. 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, 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, get in touch. Our specialists have vast experience in this field and can search for the best possible deals you’re eligible for.
We can check you have enough equity to remortgage before searching for eligible lenders to compare rates and fees.
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About the author
Martin Alexander
Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.