How to remortgage your Help to Buy

The Help to Buy Equity Loan scheme was a great way for first-time buyers to get onto the property ladder. This government backed initiative, first introduced in 2013, came to an end in March 2023. When your initial Help to Buy mortgage deal ends (usually a fixed rate mortgage, lasting between two and five years), you can remortgage.  

Here we take you through how to remortage your Help to Buy, so you can feel confident when it comes to remortgaging.

In this article:

Can you remortgage your Help to Buy?

In short, yes. When your initial Help to Buy mortgage is nearing the end you should look to remortgage. If you don’t, you will default to a standard variable rate (SVR) mortgage, which usually has a much higher interest rate.

It is however more complex than a standard mortgage, as there are strict rules that come with remortgaging your Help to Buy and not all lenders offer products. This is because you essentially have two loans, which makes you more of a risk in the lender’s eyes. Consequently, the remortgage deals available are typically more expensive (higher fees and interest rates) than normal remortgaging, however they are typically cheaper than defaulting to the SVR.

Why remortgaging your Help to Buy is important

Help to Buy Equity loans are only interest free for the first five years. When this interest-free time is up, the government will start charging you interest, increasing your monthly repayments.

This is the perfect time to think about remortgaging your Help to Buy. That way you can move the loan onto your mortgage or pay it off completely.

We recommend you talk to a mortgage adviser to discuss what is the best option for you.

Can you remortgage to pay off your Help to Buy equity loan in full?

Remortgaging would allow you to add the government loan to your mortgage value and use your new mortgage to repay the full amount. This option removes the need to pay back the 20% equity loan when you come to sell. This means that when you do decide to sell, you get 100% of any increase in your home’s value. In fact, many lenders require borrowers to pay off their equity loan as part of the remortgage process.

You can only do this if your property has gone up in value, as remortgaging would allow you to access and release the equity you’ve already built up to pay back the loan. Even if your home hasn’t increased in value, you could still remortgage to pay off your equity loan, however the loan-to-value (LTV) amount will be higher than your previous Help to Buy mortgage.

As always, you will need consider if you can afford the higher monthly repayments that this could bring, and we always recommend that you to talk to a mortgage adviser.

Staircasing (part-pay) your Help to Buy Equity Loan

If you can’t afford to repay your Help to Buy equity loan in full, staircasing could be a great option.

Staircasing is when you pay back your equity loan in chunks, over a period of time. The minimum you can pay using staircasing is 10% of the total current value of your home (not the original purchase value). As the most common equity loan amount is 20%, this will mean that you’ll have to pay off at least half of your loan using staircasing. You’ll also build up equity in your home whilst keeping your loan repayments manageable.

You should bear in mind that will also need to pay admin and survey valuation fees every time you pay off a chunk of your loan.

Is there another way to pay off your Help to Buy?

If you can afford it, you can pay off your equity loan with savings. This means that you can remortgage your Help to Buy at a lower LTV, and you can access lower interest deals and save yourself money.

Do you have to pay off your Help to Buy loan?

You don’t have to pay off your equity loan when the government starts charging interest. You can keep the loan for 25 years, or until your property is sold. However, the interest payments will rack up if you don’t pay it off quickly.

You will struggle to remortgage without paying off the loan, as most lenders require that the loan is repaid as part of the mortgage process.

What’s the process of remortgaging your Help to Buy?

As always, we recommend you speak to a mortgage adviser to discuss what is the best option for you when thinking about remortgaging your Help to Buy Equity Loan.

Once you have decided which way to go, there are a few steps to need to take:

1. Get a valuation. This will tell you what your home is worth and how much you owe the government (as the loan is a fixed percentage of the current value of your home).

2. Find a conveyancer – they will handle the legal side of clearing the loan.

3. Fill in your paperwork. This will include a Loan Redemption Form, which you can get from the housing association that handled your Help to Buy. There is normally a filing/admin fee (£200-£250) to get the redemption process under way.

4. Redemption letter. This will be posted to you and will include an estimated repayment figure.

5. Instruct your conveyancers – they will arrange the completion date when the loan will be repaid. The organisation in charge of collecting the equity loan, called Target, will then issue an “authority to complete”.

6. Payment. Your conveyancer will transfer the money to Target and your loan will be cleared.

Remortgaging your Help to Buy equity loan is a more complex process, however it can save you on your monthly repayments when you do.

When you are ready to start, get your remortgage conveyancing quote, or feel free to get in contact with one of our Move Specialists.