Have you received a letter saying your Help to Buy mortgage is about to end? If so, you might be wondering how to remortgage your Help to Buy home.

Buying your first home can be both stressful and exciting, and facing the paperwork again can seem a little daunting. It doesn’t need to be, though, and remortgaging your Help to Buy home is important if you want to avoid an increase in your monthly mortgage payments.

When you signed up to your Help to Buy mortgage, you would have agreed a cost to borrow the money you needed (interest rate) for a period of time (term). After this term ends, the cost of borrowing usually goes to a standard rate (standard variable rate {SVR}) – although it’s important to note that some products vary in their terms.

Unfortunately, this rate is sometimes a lot higher than your initial rate, which means your monthly costs might go up.

How to Remortgage Your Help to Buy House

Firstly, it’s essential to gather all the information you have on your current mortgage - this would have been sent to you. It’s a good idea to contact a mortgage adviser to help you with your remortgage.

Your mortgage adviser will talk to you about your current financial situation and discuss your options with you. As with your Help to Buy mortgage, you’ll have to make decisions on the type and length of the mortgage based on what you can afford to pay and future aspirations.

The difference between a Help to Buy remortgage and a standard one is the Government loan. It’s considered when calculating your remortgage and you also have the option to pay it back as part of your remortgage (if you can afford to do that). Your adviser will be able to explain this and answer your questions.

Not all lending companies are open to Help to Buy remortgages, and if you haven’t paid much off your mortgage yet, you might be in a higher rate range - so every penny counts. An adviser will also know which Help to Buy lenders are more likely to say “yes” to save you wasting time.

Help to Buy Government Loan Charge After 5 Years

You’ll also need to consider that the Government will start charging interest on the loan you borrowed for a deposit after 5 years - a step up from the £1 monthly management fee.

The Government issued all Help to Buy loans on an agreement that did not charge interest for the first 5 years, with only a nominal fee each month for management fees.

After 5 years, you’ll need to pay for borrowing the money - this is called interest. This is another reason why some people choose to pay this off with a remortgage.

From year 6, you'll need to pay:

  • Monthly interest of 1.75%
  • £1 per month for a management fee

The interest will rise each year in Spring by the Regional Price Index plus 1%.

Help to Buy Remortgage to Pay Back

You can use a remortgage to pay off your Help to Buy loan, but as with any borrowing, it’ll depend on your financial situation.

Unlike a typical loan, your Help to Buy loan is equity, that is, shares in your home. So, you don’t pay back what you borrowed, you pay back a percentage of the current value of the property.

So, if you borrowed 20% with the Help to Buy scheme:

  • Your house cost 200,000
  • Your house is now worth £210,000
  • Repay the 20% you borrowed with help to buy £42,000
  • Remaining 75% mortgage, £150,000

The above is based on your initial 5% deposit.

Help to Buy Remortgage Rates and Comparison Tips

When looking for the cheapest remortgage deal for your Help to Buy house, it’s essential to compare the remortgage rates and the fees over time.

Your remortgage adviser will explain this in full. Here’s what to look for:

  • Interest rate (cost of borrowing)
  • Arrangement fee
  • Booking fee
  • Product fee
  • Valuation fee
  • Possible Solicitor fee
  • Cashback
  • Standard variable rate (SVR -- the rate when your deal ends)
  • The monthly cost
  • The overall cost for comparison
  • Exit fees and early repayment charges
  • Flexibility to overpay or port the mortgage to a new property

For instance, if you see a deal that would cost you less per month but has an expensive fee, it may end up being more expensive in the long-term than a slightly higher monthly cost with a smaller fee.

A remortgage adviser will also take into account whether your needs fit the company that’s lending you the money. By selecting the best match and cheapest overall deal, you’re more likely to get a “yes” and be happy with your choice.

Remortgage Help to Buy with Bad Debt or Poor Credit

You might still be able to remortgage your Help to Buy home if you have bad debt or poor credit, but it depends how severe the debt or adverse credit is and how recently it occurred. Basically, your credit history shows how much of a risk you are. If you’re a high risk, then you’re likely to get charged more to borrow money than someone who isn’t and potentially have a smaller number of lenders to choose from.

It’s better to build up your credit score before remortgaging; you adviser can guide you in the right direction with this. Simple things like setting up direct debits for the minimum payment amount and ensuring you have enough funds in your account can help to avoid bad debt marks on your credit history.

If you need any more information on Help to Buy or if you’d like to speak with an expert adviser, get in touch today on0330 433 2927 or enquire online.

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There are many valid reasons to remortgage. If you’re considering remortgaging your home but need help finding the right option for you, contact John Charcol. Our team of experienced mortgage advisers can recommend a range of remortgage options to suit you. Request a call back or call us on 0330 433 2927 to get in touch.

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