A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. You may have to pay an early repayment charge to your existing lender when you remortgage.
If you’re wondering if you can remortgage a help-to-buy property, and whether or not you need developer approval to do so, read on.
The Help to Buy Scheme has now been around for several years. Many of those people’s mortgages are transitioning onto the lender’s standard variable rate which is often more expensive.
Are you wondering if you can remortgage your Help to Buy home? Do you need the developer’s permission first? If so, this guide is for you. Or, alternatively, speak to one of our Mortgage Experts now for a quick response.
What are the benefits of remortgaging a Help-to-Buy home?
There are a few reasons why someone might want to remortgage their Help to Buy property:
- Their fixed-rate deal is about to come to an end
- They want to move to a cheaper or a different mortgage deal
- They want to start to pay back their equity loan to the Government
- Their property value has gone up, and thus they may have the opportunity to release some equity
If you’ve had a Help to Buy loan in the past, can you still remortgage?
Although it may not always be possible in all cases, you can usually remortgage after taking out a Help to Buy Equity Loan. When you get a mortgage, the interest rate is typically fixed for 2-5 years. But once that period is up, you’ll change to your lender’s standard variable rate–which means your monthly repayments could go either way since rates can increase or decrease. Significantly, as we move into 2023 and rates continue to rise, people’s mortgage repayments are becoming increasingly unaffordable.
Interest rates on remortgages are generally higher than your original mortgage, but this may be a good opportunity if you’ve been repaying it regularly and reducing your loan to value (LTV), or if your property value has increased. You could be eligible for a better deal with a fixed rate now, depending on you new LTV.
No matter your particular circumstances, it’s in your interest that you speak to a Mortgage Expert before making any decisions. They will help you assess your eligibility and compare different deals to make sure you’re getting the deal that is right for you.
If my financial situation has changed, can I still remortgage a Help to Buy home?
Irrespective of your changes in circumstances, if you remortgage to a new lender, they will want to assess your ability to afford the mortgage. They’ll look at things like how much income you have coming in regularly, what kind of debt repayments you already make and how many years until retirement. Calculate how much you can borrow in the UK with our simple mortgage calculator.
If you can’t afford your mortgage as much as you used to with a certain lender, it doesn’t mean that remortgage is out of the question. You might just have to find a lender who is more lenient with their affordability terms. This is where a mortgage broker comes in handy.
If you remortgage, do you have to repay the Help to Buy loan?
No, you will not have to pay back the Help to Buy loan when you remortgage. However, remember that when selling your property you will have to repay your Help to Buy loan. So many homeowners use remortgage as a way to raise the money to pay for the Help to Buy loan, so that they are able to sell their property in the future without being restricted by the equity loan or any other payments.
Some mortgage lenders have rules that won’t let you remortgage with them if you still have a Help to Buy loan. That’s usually because having another financial responsibility could make it more likely that you can’t repay your original mortgage, but not always.
Therefore, if you took out a Help to Buy loan to finance your home, then remortgage functions differently than it would for someone with a traditional mortgage. For example, suppose you only have 15% of the loan left to repay–you must account for this amount when deciding how much to remortgage. Will you choose to take out additional funds in order to pay off this debt outright? Or will you switch to a lender that will accept you with your remaining Help to Buy loan, and make payments gradually from your income or savings. Still unsure what the best option for you? We can help you make an informed decision if you plan to remortgage.
If you have a Help to Buy loan, one option to repay it is to remortgage.
You’ll need to figure out if you can handle increased monthly repayments if you do remortgage your loan. A mortgage broker could be useful in this sense as they will assist you in understanding all of your incomings and outgoings, as well as help calculate what different lenders would charge for monthly repayment rates.
If you want to lower your monthly mortgage rate, you can extend your term; however, in the long run by extending your term length, you will end up paying more interest.
Repaying a Help to Buy loan by making additional payments
If you’ve owned your house for a few years, the value of your home has likely gone up. You may be able to use this increased equity to raise equity to make additional repayments on your Help to Buy loan, above the minimum 10%. This is called stair casing.
Before making any decisions, be sure to calculate your new loan-to-value (LTV) ratio. This will give you an idea of how much money you’ll need to borrow in relation to the value of your property. Although a small number of lenders are willing to extend loans with high LTVs (95%), more tend to offer lower LVTs. Furthermore, having a lower LTV can help make it easier to meet the requirements set by lenders who charge lower interest rates.
If you have a Help to Buy loan, do you need permission to remortgage?
If you still have money left to pay on your Help to Buy loan, then you’ll need to provide a Deed of Postponement to the Help to Buy administrator.
Do not worry about too much the technicality, as the solicitor working on your remortgage will sort out this paperwork for you. However, don’t forget to take the cost of using a solicitor into account when you’re deciding whether or not to go ahead with remortgaging.
There are several costs you need to take into account when remortgaging a Help to Buy property.
If you’re remortgaging to settle your Help to Buy loan, you’ll need a valuation report from a qualified valuer registered with the Royal Institute of Chartered Surveyors. This will show you precisely how much is owed. You might have an amount in mind, but it’s important to remember that the equity loan to be repaid will depend on the current value of the property, and not the original value you paid for.
The firm that manages the Help to Buy equity loans (Target) also charges an admin fee of circa £120.
You also need to budget for solicitor’s fees, and their costs will depend on different factors, such as their hourly rate, the services they provide, and your property’s value.
A mortgage broker can help save you money by finding an affordable lender and negotiating fees, like early repayment charges (ERC). ERCs are charged if you exit your current mortgage agreement before the end of the fixed-rate period. If a broker reviews your contract, they can determine whether the fee applies to you and whether it’s worth holding out until after the fixed-rate period or switching beforehand.
Mortgage brokers usually charge a fee, for example anything from £300 to £1000 depending on the complexity of your case.
Look for a Help to Buy remortgage provider
If you want to find a Help to Buy remortgage, ask a mortgage broker. They’ll consider your circumstances and then provide you with a list of lenders that fit what you need. A mortgage broker is more reliable than comparison sites, which can be time-consuming and might not have the right information for you.
At Your Mortgage Experts you will find a team with experts in their own field, including Help to Buy and remortgages. We give expert advice so that you can find the most suitable option and available cost effective solutions to fit your needs and circumstances. Feel free to call us today on 0208 154 1111.
Can I remortgage my Help to Buy property, and do I need developer approval?
Yes, you can remortgage a Help to Buy property. If you still owe money on your Help to Buy loan, you'll need to provide a Deed of Postponement to the Help to Buy administrator. The solicitor working on your remortgage will typically handle this paperwork for you.
What are the benefits of remortgaging a Help to Buy home?
Some benefits of remortgaging a Help to Buy property include: Moving to a new mortgage deal before your fixed-rate deal ends, securing a cheaper mortgage deal, starting to repay the equity loan to the Government, releasing equity if your property value has increased.
If I remortgage, do I have to repay the Help to Buy loan immediately?
No, you don't have to repay the Help to Buy loan when you remortgage. However, when you decide to sell your property, you'll be required to repay your Help to Buy loan. Some homeowners remortgage to raise the money needed to repay the Help to Buy loan, allowing them to sell their property in the future without constraints related to the equity loan or other payments. Some lenders may not allow you to remortgage with them if you still have a Help to Buy loan, so it's important to be informed about different lenders' policies.
Luca BertolinoMortgage Expert
Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.