There may be some challenges if you want to remortgage with a Help to Buy loan, but there are solutions in some cases. Read on to find out more.
What is a Help to Buy loan?
These loans were part of a government scheme launched in 2013 in a bid to assist first-time buyers onto the property ladder.
Can I remortgage?
You can remortgage at the end of your initial loan deal. You should aim to speak to an independent mortgage adviser 6 months before the original loan period ends.
If you decide to switch lenders and are accepted, then a Deed of Postponement request will need to be made. There are more details about remortgaging on the government website.
What if I don’t remortgage?
If you don’t remortgage and are still repaying your Help to Buy loan, you will be switched to your lender’s SVR or standard variable rate. Your Help to Buy loan repayment is then likely to be considerably more as the interest will rise from the fixed rate offered originally.
Switching lenders
If you decide to switch lenders, you will have to meet their criteria. Monthly repayments and interest rates will be calculated according to your LTV or loan-to-value ratio. Different lenders will have different criteria.
Handling the Help to Buy loan
After owning your property for 5 years, you will begin to pay an increasing amount of interest on that loan and you may consider remortgaging to pay off the money owed on the original mortgage. You can find out more about repaying a Help to Buy loan after 5 years from specialist solicitors such as https://www.samconveyancing.co.uk/news/conveyancing/help-to-buy-repayment-after-5-years.
Many remortgage lenders will only accept you if you have already paid off all the original equity loan but there are some options even if you haven’t.
Finding a mortgage deal
Finding a mortgage deal if you haven’t repaid the equity will be harder but isn’t impossible. You could switch lenders or take out a new mortgage with your current one. Just be aware of the potential for high fees and limited choices.
You will also have the original loan to pay back at the time of sale and this will be more if your property value has risen.
Part pay (staircase) your loan
You can begin using monthly payments to repay your equity loan. This can reduce your original mortgage to 10% of your property value.
The other alternative is to add your government loan to a property loan and then remortgage and repay the whole lot.