How to Pay off Help to Buy With Remortgage
If you're a homeowner who used the Help to Buy equity loan scheme to purchase your property, you may be wondering about your options for paying off this loan. Five years after you secured the loan, interest starts, which can increase your monthly payments. If your mortgage deal also ends, you could face higher interest rates. The loan is often repaid at the end of the first fixed mortgage term and settled by:
- Remortgaging to a higher LTV (Loan-to-Value).
- Personal savings, a further loan, or a gift from family.
- Selling your property.
Remortgaging to pay off your Help to Buy loan involves taking out a new mortgage to replace your existing one, often at a different interest rate or with a different lender.
The Help to Buy remortgage steps in a nutshell
- 1 You instruct a RICS Help to Buy valuation to assess your property's current market value. This is required by your mortgage lender.
- 2 Your solicitor verifies your identity and the mortgage lender issues a formal mortgage offer.
- 3 Your solicitor reviews the mortgage terms and requests a redemption statement for the existing mortgage.
- 4 A completion statement is prepared by your solicitor and Help to buy issues an Authority to Complete, confirming their approval of the transaction.
- 5 The existing mortgage is repaid by drawing down the new mortgage and the Help to Buy equity loan is repaid in part or in full.
- 6 Completion - the new mortgage charge is registered with the Land Registry and a memorandum of staircasing (if required) is issued.
Why remortgage?
It's important to weigh current interest rates when deciding whether to remortgage to pay off your equity loan. Depending on current market rates, you might be able to secure a lower interest rate on your new mortgage.
However, since you combine debts with your mortgage and equity loan repayment, you might find that interest rates are higher since you're borrowing more from the lender.
Remortgaging to repay your Help to Buy equity loan could help simplify your financial situation by consolidating your mortgage and equity loan into one monthly payment. It's crucial to remember that you aren't increasing your equity in the home, just passing it over from the government to your lender.
Mortgage valuation and application
When remortgaging, a lender will require a property valuation. This is to determine the property's current market value and used to assess whether the property is worth enough to secure the loan you're applying for.
A RICS Help to Buy valuation involves a visit to the property for a thorough inspection inside and out, taking note of its condition, size, location, and any recent improvements. This will be compared to similar properties in the local area that have recently been sold, and a detailed report with the findings will be sent.
We offer this service from £250 EXC VAT and can cover the whole of England. Get in touch for a free, no-obligation quote.
Once you have the report, you have 3 months to complete the repayment. The next step is applying for a new mortgage; the application must include a detailed valuation report and any relevant admin fees.
SAM's Help to Buy Repayment Calculator
Check out our Help to Buy Repayment Calculator which estimates your monthly interest payments for your equity loan.
Your Help to Buy mortgage payments differ from the Help to Buy equity loan repayments. You can use our calculator to estimate the interest repayments, but we also have a mortgage payments calculator available.
ID checks and mortgage offer
In a remortgage application, lenders will need proof of identity and funds. This is a standard practice to prevent fraud and ensure the loan is granted to the correct person.
Once they have reviewed the mortgage offer, conducted credit checks, and assessed the property valuation report, the lender will decide whether to offer you a mortgage. If approved, your solicitor will receive the offer letter within 10-20 working days. If rejected, wait at least six months before reapplying to give yourself some time to take steps to address the reasons for rejection (could be an improved credit score).
Failing to remortgage your Help to Buy means your monthly expenses increase steadily. For the first five years, you pay the management fee of £1 per month, but the interest rate starts in year six and rises in line with the Retail Price Index (RPI) plus 1% each year.
Pay close attention to the interest rate, repayment terms, and any admin fees or charges included in the mortgage offer. Don't hesitate to ask the lender for clarification if you're unsure.
Depending on your circumstances, you might be required to take out mortgage insurance to protect the lender in case you're unable to repay the loan. You might also have an early repayment charge with your existing mortgage lender, so be aware of this before embarking on a remortgage.
From local RICS surveyors for a Help to Buy valuation to expert solicitors for remortgaging or selling your Help to Buy property, SAM has you covered.
We're on 99% of mortgage lender panels and provide fixed-fee, no-obligation quotes for all your Help to Buy needs. Property challenges solved.
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Solicitor review and redemption statement
Your solicitor will
- Review the mortgage terms including the interest rate and repayment terms.
- Look over the terms of your Help to Buy equity loan and how it will be repaid.
- See if stamp duty is payable on the new mortgage and, if so, the amount.
- Prepare the legal documents for the remortgage like the transfer of title and the mortgage deed.
- Coordinate with the lender and Help to Buy.
- Provide guidance throughout the process.
The redemption statement
This is a document issued by your existing lender that details the outstanding balance of your mortgage, any early repayment charges, and the date from which interest will cease to accrue. This document is essential for the remortgage process as it provides the lender with the information they need to calculate the amount required to pay off your existing mortgage.
Your solicitor will usually request this statement from your existing lender once you've accepted a new mortgage offer. They will also submit the Source of Funds certificate to Help to Buy confirming that the funds in place are being used for the intended purpose and not to purchase additional property.
Help to Buy will process the redemption statement and Source of Funds within 10-15 working days. Once your solicitor receives the redemption statement, they will complete the necessary paperwork to transfer the funds to your existing lender and pay off the mortgage.
- Expert panel of conveyancing solicitors, with local knowledge.
- Your transaction is protected by our No Sale, No Fee policy. Terms apply.
- Fixed fee conveyancing.
- We are on 99% of mortgage lender panels.
- We can solve any property challenge.
Completion statement and authority to complete
A completion statement is a document which summarises all financial transactions involved in the remortgaging process. It outlines received funds (the new mortgage funds), amounts paid out (existing lender mortgage payments), and the remaining balance (the amount of the Help to Buy equity loan being repaid - if fully paid then this will be 0). It's typically prepared by your solicitor and sent to both you and the lender.
Help to Buy will reply after 15 working days once an Authority to Complete has been requested. This will authorise your solicitor to complete the remortgaging process on your behalf, giving them the power to sign legal documents and transfer funds as required.
An Authority to Complete includes
- Your name and address.
- The name of your solicitor.
- A statement authorising your solicitor to complete the remortgaging process.
- A list of documents that your solicitor is authorised to sign.
- You'll typically need to sign the authority to complete the document before your solicitor can proceed with the remortgaging process.
Completion
Your solicitor will draw down your new mortgage and then pay off your existing mortgage and the Help to Buy equity loan. They then submit the necessary documents to the Land Registry to update the property's ownership and charges.
Form DS1
If the Help to Buy equity loan is paid in full, your solicitor will submit form DS1 to the Land Registry. This form removes the charge associated with the equity loan from the property's title. Once the Land Registry has processed form DS1, the property will be free of any charges related to the Help to Buy scheme.
Memorandum of staircasing
If you're only making a partial payment on the Help to Buy equity loan, your solicitor submits a memorandum of staircasing to the Land Registry. This document outlines the new ownership shares of the property after the partial payment.
For example, if you initially owned 80% of the property and the government-owned 20%, and you've now repaid half of the equity loan, the new ownership shares might be 90% for you and 10% for the government.
The memorandum of staircasing will be registered with the Land Registry, updating the property's ownership records to reflect the new shares.
Once these steps have been completed, the remortgaging process will be finalised. You should receive confirmation from your solicitor that the new mortgage has been registered with the Land Registry and that the Help to Buy equity loan has been fully or partially repaid.
Help to Buy specialists
SAM's panel of conveyancing solicitors are experts in Help to Buy transactions and will help with your remortgage process to completion.
Take advantage of our fixed fees and the fact we're on 99% of mortgage lender panels. Property challenges solved.
Is it worth repaying your Help to Buy Loan?
Find out if it is worth repaying your Help to Buy Loan, or should you just remortgage and keep it.
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