Can I Pay Off My Help to Buy Loan By Remortgaging?

The Help to Buy Equity Loan was a popular option for first-time buyers looking to get onto the property ladder. However, at some point, the loan must be repaid.

One of the most common ways to settle the loan is through remortgaging. But how does the help to buy repayment process work, and is it the right choice for you? Let’s break it down.

What is the Help to Buy Equity Loan?

The Help to Buy Equity Loan was introduced to help first-time buyers purchase homes with just a 5% deposit. The government offers an equity loan of up to 20% (40% in London) of the property’s value. While the loan is interest-free for the first five years, it will need to be repaid eventually, either when you sell the property, at the end of your mortgage term, or when you choose to remortgage and settle the loan.

Remortgaging to Pay Off Your Help to Buy Loan

Remortgaging is the process of switching your existing mortgage to a new one, often to get better interest rates or release equity.

When it comes to repaying your Help to Buy loan, remortgaging can be a useful option if you’ve built up enough equity in your home and the property has increased in value.

Here’s an outline of the steps involved in using remortgaging to repay your Help to Buy loan:

1. Mortgage Valuation

First, you’ll need to get a formal valuation from a RICS (Royal Institution of Chartered Surveyors) valuer. This valuation determines how much your home is worth, which will impact the repayment amount for your Help to Buy loan. The loan amount is calculated based on a percentage of your home’s current market value, not the original loan amount.

Valuers can often be available quickly, and you should expect to receive a report within 5 working days.

2. Application Process

Next, you need to submit your Help to Buy Application Form, which includes the RICS valuation report. Along with the application, an admin fee will be required. The aim is to notify Help to Buy that you intend to repay the loan, either partially or in full.

3. Proof of Funds

You’ll also need to provide proof of funds and identification. If you’re remortgaging, this step involves securing your mortgage offer or further loan, which will be used to repay the Help to Buy loan.

4. Mortgage Offer

Once your mortgage application is submitted, it usually takes around 10 to 20 working days to receive a mortgage offer. After approval, your mortgage lender will issue an offer or further advance letter, which is sent directly to your solicitor.

5. Source of Funds Certificate

Your solicitor will then review the mortgage offer. If everything is in order, they’ll issue a Source of Funds Certificate, which is submitted to Help to Buy within 3 working days. This document confirms that the funds are in place to repay the loan.

6. Redemption Statement

Help to Buy will provide a Redemption Statement, typically within 10 to 15 working days. This statement outlines the amount required to settle the loan based on the current valuation of your property. If time is tight, you can contact Help to Buy to speed this process up.

7. Completion Statement

Your solicitor will then prepare the completion file and send a legal undertaking to Help to Buy, requesting their Authority to Complete. This step ensures that everything is legally prepared for the repayment of the loan.

8. Authority to Complete

Once Help to Buy gives their Authority to Complete (after approximately 15 working days), the process can move forward. Again, it’s possible to chase them if necessary to avoid delays.

9. Completion

Finally, your solicitor will draw down the funds from your new mortgage or further advance and pay off both the Help to Buy loan and your existing mortgage (if applicable). If the Help to Buy loan is repaid in full, an e-DS1 form is submitted to the Land Registry to remove the government’s charge on your property. If you’ve only made a partial repayment, a memorandum of staircasing will be issued, confirming the remaining loan balance.

Is Remortgaging the Right Option?

Remortgaging to repay your Help to Buy loan can be a good option if:

• Your property’s value has increased since you bought it, allowing you to release enough equity to cover the loan.

• You want to avoid paying interest on the Help to Buy loan, which kicks in after five years.

• You have a good mortgage deal available, potentially with lower interest rates than your original mortgage.

However, if your property hasn’t increased in value or your financial situation has changed, remortgaging may not be the best solution. You may end up with a higher mortgage balance or struggle to secure a new mortgage with favourable terms.

Other Repayment Options

If remortgaging isn’t right for you, there are other ways to settle your Help to Buy loan:

• Personal savings or a gift from family can be used to repay the loan in full or partially.

• Selling your property will also settle the loan, as the government’s equity share will be repaid from the sale proceeds.

Conclusion

Paying off your Help to Buy loan through remortgaging can be an effective way to take control of your finances and fully own your home. By understanding the process and considering whether remortgaging is the right option for your circumstances, you can make an informed decision about your future.

If you're unsure about your options, it may be helpful to consult a mortgage advisor or solicitor to guide you through the process.