Help to buy remortgage

Last updated: January 2024 | 3 min read

Embarking on a remortgage under Help to Buy? This concise guide ties into the broader mortgage types in the UK, focusing on essential steps and fees for a mortgage. Discover how these insights can streamline your mortgage strategy, offering a clearer, more confident path in your financial journey. Why wait? Delve into the specifics and make an informed choice today.

What is a Help to Buy remortgage?

Defining Help to Buy remortgage

A Help to Buy remortgage involves restructuring the existing property loan under the Help to Buy scheme. Homeowners transition from their current mortgage and equity loan arrangement to a new deal that may offer better terms or rates. This process typically starts when the interest-free period of an equity loan ends or when a homeowner seeks a more advantageous financial situation.

Benefits of a Help to Buy remortgage

Remortgaging your Help to Buy property presents several advantages. New interest rates obtained may be lower than the lender's standard variable rate (SVR), potentially leading to reduced monthly repayments. Homeowners gain the opportunity to pay off the equity loan partially or in full, which can lessen the total amount of interest charged over time. Additionally, homeowners might secure additional money for home improvements or other significant expenses, enhancing their property's value and living experience.

Am I eligible to remortgage my Help to Buy property?

Eligibility criteria for Help to Buy remortgage

Eligibility for a Help to Buy remortgage hinges on several factors. Initially, you must meet your current lender's criteria, which typically include not being in mortgage arrears and having a history of making full, on-time payments. Furthermore, the equity loan scheme administrator must approve your remortgage application. They will review your financial status to ensure you can manage potentially higher monthly repayments after remortgaging.

The criteria also extend to the property itself. It must be your primary residence, not a rental property or a second home. Moreover, you must not have any legal issues with the property that could affect the remortgage. Prospective lenders will require a chartered surveyors valuation report to determine the property's current market value. The loan to value ratio derived from this valuation influences your remortgage options.

Impact of property value on eligibility

The market value of your property directly affects your ability to remortgage. If property prices have risen since your initial purchase, you could benefit from increased equity, potentially unlocking more money and a better mortgage deal. An increase in property value might also mean you could access more favourable loan to value ratios, leading to more competitive interest rates from lenders.

Conversely, if the property's market value has decreased, you may find yourself with limited options. In such cases, lenders may offer less attractive terms, or you might need to pay a larger part of the equity loan before you can remortgage. This could affect your financial plans, as you might have to start paying interest on the equity loan sooner than anticipated if your loan to value ratio is higher. It's crucial to understand that the equity loan repayment remains fixed at the percentage originally agreed, regardless of changes in property value.

Understanding your eligibility is the first step in deciding whether a Help to Buy remortgage is feasible for you. Review your circumstances, the current property value, and the specific requirements set by lenders to ascertain your position.

Choosing the right mortgage broker for your Help to Buy remortgage

What to look for in a mortgage broker

Selecting a mortgage broker with a strong track record in the Help to Buy remortgage sector streamlines the process. Experience with equity loans often signals a broker’s ability to find favourable mortgage deals that align with your unique financial circumstances. Seek brokers registered with the Financial Conduct Authority for assurance of their credibility. Peer reviews and client testimonials offer valuable insights into a broker's expertise and customer service quality.

How a mortgage broker can assist with equity loans

Mortgage brokers proficient in equity loans bring a wealth of knowledge, especially about the Help to Buy scheme. They act as intermediaries, comparing offers from various lenders to secure the best deal for you. Their negotiation skills can be particularly advantageous when it comes to interest rates and repayment terms. A competent broker will handle the intricacies of your application, ensuring compliance with both your current lender’s requirements and those set out by the buy scheme administrator.

Preparing for the remortgage application

Documents and information you need

For a smooth remortgage application, gather all necessary paperwork in advance. You'll need proof of income, bank statements, identification documents, and details of your existing mortgage and equity loan. An accurate, up-to-date valuation of your property is also required. Some lenders may request a breakdown of your monthly expenditures to assess affordability. Ensuring all documentation is current and readily available expedites the application process.

Understanding the timeline and process

Familiarize yourself with the remortgage timeline, which typically involves several steps. After compiling your documents, you'll apply to your chosen lender. They'll conduct a property valuation and underwriting assessment. If you're approved, legal checks follow, leading to a binding mortgage offer. Be aware, each stage has its own timeframe; delays can occur, particularly if additional information is needed. Planning for each phase minimizes surprises and eases the transition to your new mortgage deal.

Dealing with negative equity during remortgage

What is negative equity?

Negative equity happens when a property's value is less than the mortgage secured on it. Homeowners with Help to Buy might encounter this when property prices dip. If you're in this situation during a remortgage, your loan balance has outpaced the current worth of your house.

Options if your property is in negative equity

If negative equity affects your remortgage plans, several paths are open. Staying put with the existing lender might mean moving to a potentially higher standard variable rate (SVR). Supplementing your mortgage repayments to diminish the balance is another option. In some cases, requesting a postponement to hold off on remortgaging until property values rise could be the most strategic move. Before deciding, it's best to speak with a financial advisor, who can lay out the implications of each choice based on your unique financial landscape.

Finding a new lender for your Help to Buy remortgage

Comparing different lenders

The search for a suitable new lender for your Help to Buy remortgage requires diligence. A broad comparison of the market is crucial, as lenders cater to Help to Buy homeowners with various remortgage deals. Consideration should be given to factors such as the interest rate, management fee, and the length of the mortgage term. Each lender will offer a different package, and finding one that meshes with your financial objectives requires thorough research.

What to expect from a new lender

Approaching a new lender means being prepared for a comprehensive financial assessment. They will evaluate your credit rating, evaluate your income, and consider how much remains on your Help to Buy equity loan. It's common for a new lender to offer the consolidation of your equity loan and existing mortgage into a single loan, which might result in a higher interest rate. Be prepared for possible administrative fees and a fixed interest rate that typically lasts for at least half of the agreed mortgage term. Since lender policies vary significantly, obtaining clear, upfront information is crucial to make an informed decision that will benefit your financial future.

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