Remortgaging with the
Help to Buy Scheme
EVERYTHING YOU NEED TO KNOW FOR
Remortgaging with the Help to Buy Scheme
The Help to Buy scheme has helped countless first-time buyers step onto the property ladder with government-backed equity loans. While the scheme is now closed for new applications in most parts of the UK (except Wales), many homeowners who purchased under the scheme are now considering their remortgaging options.
As BMI Money, an award-nominated mortgage broker, we’ve guided numerous clients through the complexities of remortgaging under the Help to Buy scheme. This article explains your options, challenges, and the benefits of remortgaging, tailored for those navigating this process.
Understanding the Help to Buy Scheme
The Help to Buy: Equity Loan scheme (2013-2023) allowed first-time buyers to purchase newly built homes with just a 5% deposit, supplemented by a government loan of up to:
20% of the property value across most regions of England.
40% of the property value in London.
The equity loan was interest-free for the first five years. From the sixth year, borrowers began paying 1.75% interest, which increased annually by the Consumer Price Index (CPI) + 2% (or Retail Price Index + 1% for earlier applicants). The equity loan must be repaid when you sell your home, complete your mortgage term, or refinance the loan.
Why consider
Remortgaging on a Help to Buy Property?
Remortgaging provides an opportunity to:
Interest Rate
Secure better interest rates and reduce monthly payments.
Release Funds
Unlock equity in your property if it has increased in value.
Repayment
Pay off the Help to Buy equity loan, either partially (staircasing) or in full.
Improve LTV
Reassess your loan-to-value (LTV) ratio, potentially improving your borrowing options.
However, navigating a Help to Buy remortgage involves additional steps and fees.
That’s why working with a mortgage broker, such as BMI Money, is essential.
Your Options for the Equity Loan
When remortgaging a Help to Buy property, you can choose to:
1. Keep the Full Loan
You can remortgage while maintaining the Help to Buy equity loan. However:
a) Fewer lenders offer products for this option, making it harder to find a good deal.
b)The government loan amount is tied to your property’s current value, meaning it increases if your property has appreciated.
2. Staircase (Part-Pay) the Loan
Staircasing allows you to repay part of the equity loan in increments of at least 10% of your property’s market value. This reduces your loan balance and interest payments but incurs additional fees.
3. Pay Off the Loan in Full
This is the most straightforward way to eliminate the government loan entirely. By adding the equity loan to your mortgage, you simplify your financial obligations and retain full ownership of your home. However, this option depends on your affordability and LTV ratio.
Pros and Cons of Remortgaging Help to Buy Properties
After the Five-Year Period
Once the initial five-year interest-free period ends, you’ll begin paying interest on the equity loan. If you fail to remortgage, you’ll automatically move to your lender’s Standard Variable Rate (SVR), which is usually higher and more expensive.
Loan-to-Value (LTV) Ratio
Your LTV ratio determines your borrowing power:
- Some lenders include the Help to Buy equity loan when calculating your LTV, while others don’t.
- A lower LTV ratio can unlock better rates.
Legal and Administrative Fees
Remortgaging on a Help to Buy property often includes:
- A £200 administration fee to Homes England.
- Costs for a RICS valuation (mandatory for equity loan repayment).
- Solicitor and lender fees for legal and financial processes.
How to Remortgage a Help to Buy Property
1. Start Early
Speak to a mortgage broker six months before your current mortgage deal ends.
2. Property Valuation
Arrange a valuation through a RICS-accredited surveyor to determine your home’s current market value.
3. Apply to Repay the Equity Loan
Submit an application to Homes England and pay the administration fee if you plan to repay part or all of the equity loan.
4. Shop Around for Deals
A broker like BMI Money can help you find competitive remortgage options tailored to your financial goals.
5. Complete the Process
Your solicitor will handle the final steps, including settling outstanding payments with your current lender and arranging new mortgage terms.
Why choose bMI Money for Help to buy mortgages
At BMI Money, we specialise in guiding clients through the complexities of remortgaging Help to Buy properties. Our services include:
1
Access
Access to broker exclusive deals from top lenders.
2
Advice
Personalised advice tailored to your financial situation
3
Support
Support with the entire process, from valuation to completion.
take the next step
Remortgage with BMI Money
Navigating the Help to Buy scheme can feel overwhelming, but you don’t have to do it alone. Whether you want to staircase your equity loan, repay it in full, or secure a better mortgage deal, we’re here to help. Contact BMI Money today for expert advice and assistance.
Get Started Today
Let us help you make informed decisions for a financially secure future.
FAQs
the
Help
to Buy
Scheme
Can I remortgage if I have a Help to Buy Equity Loan?
Yes. If you bought your home using a Help to Buy Equity Loan, it may be possible to remortgage either with your existing lender or a new lender. The process and permissions required will depend on whether you are changing lender, borrowing additional money or repaying some or all of your equity loan.
Do I have to repay my Help to Buy Equity Loan when I remortgage?
Not necessarily. Depending on your circumstances, you may be able to remortgage while keeping the Help to Buy Equity Loan in place. Alternatively, you could use the remortgage to repay some or all of the equity loan. If you repay only part of it, there are minimum repayment requirements.
How much will it cost to repay my Help to Buy Equity Loan?
The amount you repay is based on the percentage of the property’s current market value represented by your outstanding equity loan, rather than simply the original cash amount you borrowed. A RICS valuation is therefore normally required as part of the repayment process.
Can I borrow more when remortgaging a Help to Buy property?
Additional borrowing may be possible, but it is restricted. Homes England states that additional borrowing will generally only be permitted for specified purposes, such as repaying some or all of the equity loan, certain approved structural alterations or a transfer of equity.
Do I need permission to remortgage my Help to Buy property?
It depends on what you are doing. For example, if you remain with your existing lender and remortgage without borrowing more, you generally do not need to apply for permission, although a Deed of Postponement may still be required. If you change lender while retaining the equity loan, you need to apply for permission.
When do I start paying interest on my Help to Buy Equity Loan?
For Help to Buy Equity Loans in England, interest payments begin after the first five years. Interest payments are separate from repayment of the equity loan itself, so paying the monthly interest does not reduce the amount of equity loan you ultimately need to repay.
