Your Options to Remortgage with a Help to Buy Equity Loan
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1. Keeping the Help to Buy Equity Loan in Place
Coming to the end of your Fixed-rate Deal?
You can keep the equity loan in place and avoid moving on to your lenders Standard Variable Rate (SVR) and paying higher mortgage payments by considering the following two options.
Product Switch – A lot of lenders now offer existing customers a new rate to switch on to when their current rate finishes. The new rates may or may not be as good as they offer new customers. Some lenders will write to you before your current rate finishes and tell what your new options are, whilst others may just move you on to the variable rate and leave it for you to contact them.
Remortgage – It's always worth checking what other lenders will offer you to move away from your current lender, as you may pick up a better rate by going elsewhere and save money.
Getting a remortgage with a Help to Buy Equity Loan in place can be a little harder than a standard remortgage where there is no equity loan because there are fewer lenders that offer these deals.
There are also several conditions that apply when keeping the equity loan in place. You would not normally be able to borrow any extra money on top of what you currently owe or extend the term any longer than is currently remaining.
You will also need to get approval from Help to Buy and there is an admin charge involved which is currently £115.
There will also be a form that needs to be sent to Help to Buy along with your mortgage offer and solicitors’ details. More details can be found in the Customer Information Pack or the Help to Buy website for remortgaging here
2. Repaying part of the Equity Loan Back
When property prices are increasing you may decide you want to pay back part of the equity loan (known as Staircasing) as the longer you leave it the more you will eventually payback. This is because the amount you pay back is the percentage amount you borrowed but based on the value at the time you pay it back.
Staircasing has several requirements which must be applied – some include:
The minimum amount you can staircase at one time is 10% (of the total market value of the property at the time you staircase).
With London Help to Buy you may only staircase in multiples of 10%, 20% and 30%
You cannot staircase if there are any arrears of interest payments (on the equity loan) and/or management fees on your mortgage account.
As with a standard Help to Buy remortgage, although there are more lenders offering these loans, it's still not as many as when you initially bought your property so it worth getting professional advice on what’s available.
There are more factors to consider here too that will determine whether this can be done and the rates that you could get. These will include, the amount of equity available in the property being enough to raise the extra money and meeting the lender's affordability criteria for the new mortgage.
You will need to have an up to date valuation carried out on your property by a RICS qualified surveyor and you will need to cover the cost of this.
This valuation will be used to determine the current value and how much you need to pay back to Help to Buy.
When you apply for the remortgage, the lender will also want to carry out their own valuation too and there may be some legal costs involved.
There is also an admin charge for Help to Buy, currently £200 and more details can be found in the Help to Buy Customer information pack for staircase remortgaging
3. Repaying ALL of the Equity Loan Back
The equity loan will be interest-free for the first 5-years and is usually repaid when you sell your home, at the end of the term (if you stay in the property) or earlier if you wish.
One way you could pay this back is by arranging a remortgage to raise the extra money. As with the above two options, there is a process involved and several factors will need to be met including making sure there is enough equity in your property to do this, as well as meeting the lender's affordability criteria.
As with option 2 above, when repaying all of the Equity Loan (redeeming) you will need to have an up to date valuation carried out on your property by a RICS qualified surveyor as this will be used to determine how much you need to pay pack.
Again, the lender will want to carry out their own valuation for the remortgage application and legal costs may be involved.
More information can be found here in the Customer Information Pack from Help to Buy