They want to know whether they can remortgage a Help to Buy home and whether they need permission from the developer to do so. If you’ve got similar questions, read this guide or contact a Mortgage Hut broker now for a quick response.
Why remortgage a Help to Buy home?
There 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 more flexible mortgage deal
They want to pay back their equity loan
They have built equity up in their property and want to access the additional value
Can I remortgage if I’ve had a Help to Buy loan?
Yes, with many cases it is possible to remortgage after taking out a Help to Buy Equity Loan. When you take out a mortgage, you’ll likely have fixed a rate for a set amount of time i.e. 2-5 years.
After that fixed-rate period ends, you’ll move onto your lender’s standard variable rate and because that rate of interest can go up or down, your repayments will be unpredictable. As rates continue to increase as we head into 2023, so do many people’s mortgage repayments.
That’s why people decide to remortgage onto a different deal. While interest rates may be typically higher than they were when you initially took your mortgage out, you may be in a better financial position now, with more equity behind you.
If you’ve been repaying your mortgage or have a property that has increased in value, you may be eligible for a better remortgage deal with a fixed-rate versus your original agreement.
Every situation is different but the important thing is to get advice from a qualified professional before you hastily hop to another deal without checking your eligibility and whether there’s a cheaper deal elsewhere.
Can I remortgage a Help to Buy home if my financial situation is different now?
But that won’t be the case for everyone and that’s ok. When it comes to judging your affordability for a remortgage, your lender will want to determine whether you can afford your hypothetical new repayments plus interest. They’ll look at factors like your level and stability of income, debt repayments and how close you are to retirement.
If your affordability isn’t as good as it was, it doesn’t necessarily mean you can’t remortgage, it might just mean that you have to find a specialist lender with more flexible terms. That’s where the help of a mortgage broker can be invaluable.
Do you have to pay back the Help to Buy loan when you remortgage?
No but when it comes to selling your property, you will be required to have paid back your Help to Buy loan. It’s common for Help to Buy homeowners to remortgage for an amount that allows them to cover the expense of the loan repayment, so that moving forward, they’re free from the loan or can sell up when they want.
Some mortgage lenders have criteria that won’t allow you to take a remortgage with them if you’ll still have the Help to Buy loan after remortgaging. Often that’s because having the additional financial obligation puts you at risk for not repaying your mortgage with them but that’s not always the case.
That’s why remortgaging a home that was bought with a Help to Buy loan is a little different versus remortgaging a standard property. If you have say 20% of the loan to repay, you’ll need to factor in the repayments for this when considering how much to remortgage for, whether you choose to borrow more to repay it altogether or just switch to a different deal and repay the loan using your income or savings.
Remortgaging to repay a Help to Buy loan
If you do decide to remortgage in order to repay your loan, you’ll need to work out whether you can afford the higher repayments. It can be a good idea to work this out with a mortgage broker who can look at all of your income versus your outgoings, as well as calculate your monthly remortgage repayments with different lenders.
You might decide to extend your mortgage term in order to spread the cost but keep in mind that you’ll end up paying more interest overall versus taking a shorter mortgage term with higher repayments.
Staircasing to repay a Help to Buy loan
You might also want to consider using the equity or “value” that you’ve built up in your home to repay your Help to Buy loan. If your home has increased in value over the years, you could remortgage based on the new value, release the equity and use it to repay a chunk of, or all of the loan back. This is known as staircasing and through the Help to Buy scheme, the minimum you can repay is 10% at a time.
Before you decide to do that, calculate your new loan-to-value (LTV) ratio. This is the amount of loan you’ll be applying for in relation to your property’s value. A small group of lenders will allow you to remortgage with a high LTV of 95% but more will allow for a remortgage with a lower LTV. A lower LTV can also help you to meet the criteria for lender’s with lower interest rates.
Do you need permission to remortgage if you have a Help to Buy loan?
Yes, if you still have a portion of your Help to Buy loan left to pay, you’ll need to request a Deed of Postponement and send it to your Help to Buy administrator. If you’re unsure about who that is, look at your Help to Buy agreement.
Your solicitor will be the one that sends the Deed of Postponement request off, so contact them and let them know about your intention to remortgage so that you can get this in order. Remember to factor in the cost of your solicitor when deciding whether or not to remortgage too.
Costs to consider when remortgaging a Help to Buy property
If you’re remortgaging to repay your Help to Buy loan, you’ll need a Royal Institute of Chartered Surveyors’ valuation report. This will tell you exactly how much you have to pay back. You may have a figure in mind but remember, you repay the loan based on the property’s current value, not what you originally paid for it.
The firm that manages the Help to Buy equity loans (Target) also charges an admin fee costing around £120.
There’s also your solicitor’s fees to include and these will vary considerably based on their price, what they do for you and possibly your property’s value.
Having a mortgage broker find you an affordable lender can save you money where some fees are concerned, like early repayment charges. ERCs are usually if you exit your previous mortgage agreement before your fixed-rate period ends and when your broker looks through your current contract, they can calculate whether the fee applies to you and whether it’s worth holding out until you’ve left your fixed-rate period or whether it makes more financial sense to switch before.
Mortgage brokers also charge a fee, though some include the fee within the mortgage. Many charge a fee when the mortgage completes. The actual amount you pay will depend upon your circumstances but as an example, with The Mortgage Hut, the fee is up to 1.5%, but a typical fee is 0.3% of the amount borrowed.
Find a Help to Buy remortgage lender
You can find a lender that specialises in Help to Buy remortgages by asking a mortgage broker to look at your circumstances and filter down the options. That’ll leave you with a condensed list of suitable lenders rather than trawling through comparison sites which are not only time consuming but often ineffective at providing accurate quotes based on your unique situation.
Call 023 8098 0304 for honest, clear and accurate advice that you can rely on or use the contact form to get in touch. The Mortgage Hut have a team of advisors that each specialise in their own area, including Help to Buy and remortgages. They provide solid advice with the intention of helping you find the most affordable mortgage route based on your circumstances.