Help to Buy Remortgage
Chris Needham talks us through remortgaging with Help to Buy.
In less than 10 minutes, you’ll know a lot more about getting your Help to Buy Remortgage sorted.
Can you remortgage with Help to Buy? How does it work?
The government Help to Buy scheme offered buyers the chance to borrow up to 20% of the value of a new build property on an interest-free basis for up to five years. Known as the equity loan, this was a very popular scheme.
Running alongside that, many purchasers took out a five-year fixed rate mortgage. We’re now seeing lots of clients come to us with those deals coming to an end. Some clients are remortgaging and leaving the Help to Buy equity loan in place, which is certainly possible, while a lot more people are remortgaging and raising extra capital from the equity in their property to repay the Help to Buy loan.
Either approach is possible. You can either keep the loan and remortgage or you can raise extra money to repay it. Obviously if you are raising the extra money, your payments are going to increase, so the remortgage needs to be assessed for full affordability. And, obviously, the loan has been interest-free for five years. Adding it to a mortgage now incurs a level of interest you need to allow for.
When is it a good time to pay off a Help to Buy loan?
Because it was interest-free for five years, most people take full advantage of that period and then repay it at the end of five years.
If you initially benefited from the full 20% share, then when you come to repay it, the debt will be 20% of the property’s current market value. Because property prices have been increasing over the last few years it does mean that in most cases you’re repaying more than you initially borrowed.
So most people repay it at the end of the five years before the interest kicks in – assuming that they can borrow enough from the lender to repay it.
How long does it take to remortgage with Help to Buy then?
It’s a slightly more complicated process where Help to Buy is involved, not least because you need to arrange for an independent RICS surveyor to come and value your property. This is one of the conditions of Help to Buy – an independent valuation of the property so that they can work out how much you need to repay.
The valuations are only valid for three months, so you can’t start the remortgage process until you’re in the last three months of your current deal. But if you start the process at that point, there’s plenty of time to get it all done and be on your new scheme once your existing deal ends.
Speak To an Expert
Do you need a solicitor to remortgage with Help to Buy?
You need a solicitor when you do any standard remortgage, although most lenders offer this as a free incentive. With a standard remortgage, lenders tend to offer you the chance of either taking some cash back or working with a solicitor that they allocate on your behalf.
On a Help to Buy remortgage, there is a little bit more work involved. The solicitors would charge you for that aspect of the process. Usually it makes sense to engage with a solicitor that you’ve used before or who has been recommended to you, rather than ones allocated by a lender. It means you’ve got more control over the process.
Is remortgaging the best way to pay back Help to Buy? Are there any other options?
If you’ve been saving hard for the last five years during that interest free period, you might just be able to repay it from savings. But most people are raising money by way of a remortgage to repay that Help to Buy.
It is down to an affordability assessment. So if you’re borrowing more to repay the loan, your mortgage is going to increase, so you need to make sure that the lender is happy before you start the process.
Raising the capital and removing the Help to Buy loan means that it’s then fully your house with a mortgage secured on it. You can then start to do home improvements to drive up the value even further. You wouldn’t do that whilst you’ve still got a Help to Buy loan on it, because the debt would increase with extra growth in the property value.
How much does it cost to pay back Help to Buy?
This is where we can help and just make sure you fully understand the process. First we would make sure that you can borrow enough to repay your current mortgage, and also borrow the additional amount to repay the Help to Buy.
Borrowing more means your mortgage payments are going to increase. You’ll also have to pay for the independent RICS valuation and the additional legal costs.
What other advice do you have on Help to Buy remortgaging?
We can talk to you about what the monthly mortgage payments are going to be, and help you with the timings. We’ll make sure you start the process at the right time to get it all switched over ready for the end of your current deal.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.