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How to remortgage your Help to Buy loan

Now that you've settled into your new abode, the last five years have passed, and you're facing the next financial step – how to remortgage your Help to Buy loan.

Jun 2024 | Mortgage Essentials

Purchasing your first home is a milestone worth celebrating but often comes with financial intricacies. One standard route many first-time homebuyers take is through the Help to Buy scheme. Now that you’ve settled into your new abode, the last five years have passed, and you’re facing the next financial step – how to remortgage your Help to Buy loan. This guide will walk you through everything you need to know about remortgaging your Help to Buy property, offering practical tips and valuable insights for first-time homebuyers, those utilizing the Help to Buy scheme, and home movers.

 

In this comprehensive guide, you’ll learn:

  • What the Help to Buy scheme entails
  • The benefits and considerations of remortgaging
  • Detailed steps on how to remortgage your Help to Buy loan
  • Tips for making the process smoother and more efficient

Let’s dive in!

 

What is the Help to Buy Scheme?

The Help to Buy scheme was introduced to assist first-time homebuyers and home movers in purchasing new-build properties. It offers an equity loan covering up to 20% (40% in London) of the property’s value, requiring only a 5% deposit from the buyer.

Understanding the Equity Loan

The equity loan provided under the Help to Buy scheme is interest-free for the first five years. However, starting from the sixth year, you will be required to pay a monthly interest fee of 1.75%, which will increase annually based on the Retail Prices Index (RPI) plus 1%.

Who is Eligible?

First-time homebuyers and home movers looking to buy a new-build property are eligible for the Help to Buy scheme. There are no income restrictions, but the property must fall within the government’s regional price cap.

Benefits of the Help to Buy Scheme

The Help to Buy scheme, a significant advantage for homeowners, makes homeownership more accessible, requiring a lower deposit and offering five-year interest-free loans. Additionally, it provides an opportunity to purchase more significant or expensive properties than might otherwise be affordable.

 

Why Consider Remortgaging Your Help to Buy Loan?

Remortgaging your Help to Buy loan can offer numerous financial advantages, from securing lower interest rates to unlocking equity for home improvements. This process opens up possibilities for a more secure and prosperous financial future.

End of your current fixed deal

One of the primary reasons homeowners consider remortgaging is because you are fast approaching the end of your fixed deal. With interest rates fluctuating, understanding the increased costs of your mortgage early on will help you start to budget accordingly. 

Release Equity

If your property has appreciated since you first purchased it, remortgaging can provide an opportunity to release some of the equity. This can be particularly useful for funding home improvements or consolidating other debts.

Avoid Increasing Interest Rates

As mentioned earlier, the equity loan from the Help to Buy scheme becomes subject to interest after the first five years. By remortgaging before this period ends, you can avoid the increasing interest rates of the equity loan.

Steps to Remortgage Your Help to Buy Loan

Remortgaging your Help to Buy loan requires careful planning and understanding the steps involved. Here’s a detailed guide to help you navigate the process:

Step 1: Assess Your Financial Situation

Before embarking on the remortgage process, examine your financial situation closely. Evaluate your income, expenses, and mortgage terms to determine your goals and needs.

Step 2: Obtain a Property Valuation

A crucial step in the remortgage process is obtaining an up-to-date property valuation. This will help determine your home’s current market value and equity.

Step 3: Inform Your Mortgage Lender

Inform your current mortgage lender of your intention to remortgage. They may offer competitive rates to retain your business, so it’s worth exploring their options.

Finding the Right Remortgage Deal

Selecting the right remortgage deal involves comparing various lenders and mortgage products to find the one that best suits your needs.

Compare Lenders

Research and compare offers from different lenders. Look for those specializing in Help to Buy remortgages, as they may offer more favourable terms and a deeper understanding of your unique situation.

Consider fees

When comparing remortgage deals, account for any fees associated with the new mortgage. This includes arrangement fees, valuation fees, and legal costs, which can add up and impact the overall cost-effectiveness of the deal.

Seek Professional Advice

Given the complexity of the remortgage process, especially when dealing with Help to Buy loans, it’s highly recommended to seek professional advice. A mortgage broker or financial advisor can provide valuable insights and personalized advice to help you make informed decisions.

The Remortgage Application Process

Once you’ve selected a suitable remortgage deal, it’s time to proceed with the application process.

Gather Necessary Documentation

Prepare all the necessary documentation required for the remortgage application. This typically includes proof of income, bank statements, identification, and details of your existing mortgage.

Submit Your Application

Submit your remortgage application to the chosen lender. Be prepared for a thorough assessment of your financial situation and property details, as the lender will conduct their due diligence.

Await Approval

After submitting your application, await approval from the lender. This process may take several weeks, so be patient and responsive to any additional requests for information.

Tips for a Smooth Remortgage Process

Here are some additional tips to help make the remortgage process as seamless as possible.

Plan Ahead

Start the remortgage process well before any critical deadlines, such as the end of the interest-free period on your Help to Buy loan. This allows ample time to explore options and complete the necessary steps.

Keep Communication Open

Maintain open communication with your current and new lender and any professionals assisting you. Clear and timely communication can help address issues and keep the process on track.

Stay Informed

Stay informed about market trends and changes in interest rates. This knowledge can help you make strategic decisions and secure the best remortgage deal. You can secure a mortgage rate of up to 6 months from the end of your current fixed term.

 

Common Challenges and How to Overcome Them

While remortgaging your Help to Buy loan can offer significant benefits, it may also present challenges. Here are some common obstacles and tips for overcoming them.

Limited Equity

If your property has yet to appreciate significantly in value, you may have limited equity to work with. Consider waiting until you have more equity or exploring alternative financial solutions in such cases.

Credit Score Issues

A poor credit score can impact your ability to secure favourable remortgage terms. You can improve your credit score by paying off debts, reducing credit card balances, and ensuring timely payments.

Complex Paperwork

The remortgage process involves substantial paperwork and documentation. Stay organized, keep track of required documents, and seek professional assistance.

Conclusion

Remortgaging your Help to Buy loan is a strategic move that can offer numerous financial benefits, from securing lower interest rates to unlocking equity for essential projects. By understanding the process, comparing options, and seeking professional advice, you can navigate the remortgage journey with confidence and ease.

 

Take the first step today by assessing your financial situation and exploring remortgage options tailored to your needs. With careful planning and informed decision-making, you’ll be well on your way to achieving your financial goals and maximizing the benefits of your Help to Buy investment.

 

Reach out to our experienced advisers, and we’ll give an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!

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