Remortgage for Help to Buy – how does it work?
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Remortgage for Help to Buy - how does it work?
The Help to Buy Equity Loan scheme is a good way for First Time Buyers to get on the property ladder. But once you are part of the scheme, how easy is it to get a new mortgage when your initial term ends?
Can I remortgage on Help to Buy?
A typical time to remortgage is when your fixed rate deal is ending, which is often after two, three or five years.
Because you need a specific Help to Buy mortgage, you will have a smaller choice of lenders and products than someone with a standard residential mortgage deal.
It helps to be well prepared, so contact your mortgage broker around six months before your deal is due to end. We will explore all the options for you.
Can I remortgage to pay off the Help to Buy equity loan?
As you know, the equity loan is interest free for five years, after which time the interest rate increases annually. Some mortgage lenders will want you to have repaid the loan in order to accept you as borrower – but that’s not true for all of them.
You don’t have to repay the loan – you can choose to leave it until you sell the property, but a lot of buyers choose to extend their mortgage to repay the equity loan in full, or in part.
This is much more straightforward if your property has gone up in value since you took out the mortgage. Remortgaging essentially allows you to release equity you’ve built up, so you can borrow more. Do bear in mind that by repaying the government loan with your equity, you will increase your monthly mortgage repayments. This will need to be affordable to you.
Some people choose to extend the mortgage term to allow for this. Taking your mortgage loan amount over 35 years rather than 25 years will reduce the monthly payments.
Do many lenders offer remortgages for Help to Buy?
The number of lenders who offer Help to Buy remortgages is fairly limited, because mortgage providers feel that having two loans on a property makes you a riskier borrower.
Help to Buy mortgages typically have higher interest rates and fees than a standard mortgage. However, remortgaging will still save you a lot in comparison with doing nothing. If you don’t switch mortgage deals at the end of your fixed rate term, you will go onto the lender’s Standard Variable Rate (SVR) which has high interest rates – that will cost you a lot more than getting a new mortgage.
How do I get the best Help to Buy remortgage deals?
There are two important elements in getting a good remortgage deal. First is timing – start the process six months before your deal is set to end. A mortgage offer will last six months, so by starting early you will get the broadest options.
Second is to seek professional financial advice from a broker. It’s our job to explore all the mortgage lenders and products to find the most suitable products for you. We can also work with banks and building societies that don’t deal direct with the public.
Generally, you will find better mortgage rates if you have a lower Loan to Value (LTV) ratio. This is how much you owe on the mortgage versus the value of the property. If you have paid off a good amount of the mortgage or your property has increased in value, this will help reduce your LTV.
What are my remortgaging options if I’m in negative equity?
Negative equity is where you owe more on the mortgage than your property is worth. The good news is that with the buoyant property market today, negative equity is fairly rare.
If you do end up in this situation, It’s very difficult to remortgage and you may have to stay on the Standard Variable Rate until property prices rise. If you’re able to repay part of your mortgage during this time as a lump sum, that can help too.
Where to start with a Help to Buy remortgage
Contact us at Mortgages by McAteer today to arrange a fee-free initial consultation and understand your options. We’ll look at your specific situation and talk through the various routes available to you – whether you want to repay part of the equity loan, all of it, or leave it as it is.
We’ll recommend suitable mortgage deals and support you through the application process. We’re on hand to help you at every step to save money on your Help to Buy mortgage.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.