Financial Services Blog

Simplifying a Help to Buy Remortgage

July 26, 2019

Remortgaging after Help to Buy need not be a headache.

Since it’s launch in 2013, the Help to Buy (HTB) scheme has helped thousands of first time buyers get their feet on the property ladder. The scheme made it possible for those who were stuck renting and unable to save for a significant deposit to break the cycle and become homeowners. The scheme looks to have achieved what it set out to, with recent years seeing the highest number of first-time buyers since 2006. The government’s Help to Buy website does a great job of setting out all the detail on how the scheme works.

Now in it’s 6th year, many of those who made use of the scheme are now coming to the end of their mortgage term and will be considering their options. In the absence of a remortgage or loan repayment, buyers would be required to begin making interest payments on the 20% government loan at a rate of 1.75%, increasing year on year in line with the Retail Price Index plus 1%. The impact of these additional costs can be significant.

Fortunately, we have seen an influx of lenders, including Natwest, Leeds Building Society and Barclays entering the Help to Buy mortgage market, making it more competitive and reducing the complexities and struggles of replacing the existing Help to Buy product with a more favourable product, on a better interest rate.

Avoid high fees!

Be sure to shop around when looking to remortgage a Help to Buy mortgage. We’ve had cases where the original property developer has recommended a mortgage adviser charging fees of around £1,500! There is no need to pay that much. Help to Buy remortgage applications have been tricky in the past, but they are more readily available today. Free legal expenses are also available, although a small fee remains payable in order to transfer 100% of the property to you. You will also need to arrange an independent RICS survey before your home can be remortgaged. You can find a local RICS surveyor at www.ricsfirms.com.

When your current Help to Buy (HTB) mortgage deal is coming to an end and you are looking to re fix to a more favourable rate, there are options available. If your home has increased in equity and your current income & affordability fits, you can re-mortgage by including the original HTB equity loan amount plus the current mortgage balance and re-mortgaging them into one loan amount, thus saving the additional 1.75% on the government portion of the loan. There are many competitive high street 2,3 or 5 year fixed rates available with high street lenders.

There is the possibility of borrowing up to 90% of the value of your home as long as income and affordability fits the lenders criteria. And to ensure the monthly repayments stay affordable you may be able to increase the overall mortgage term, depending on your age! Even if you do not have enough equity in your property to repay the HTB equity loan in full you can still take advantage of re-mortgaging to one of the competitive high street rates available.