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Can I Remortgage with a Help to Buy Equity Loan Still in Place?

Can I Remortgage with a Help to Buy Equity Loan Still in Place?

For homeowners who used a Help to Buy equity loan to purchase their property, a common question is whether they can remortgage while this loan is still in place. The answer is yes, you can remortgage with a Help to Buy equity loan, but there are specific considerations and steps you need to be aware of.

Understanding the Basics

The Help to Buy equity loan was a government scheme that lent you up to 20% of the cost of your newly built home (40% in London), meaning you only needed a 5% cash deposit and a 75% mortgage to make up the rest. This loan is interest-free for the first five years.

Remortgaging Options

When it comes to remortgaging with a Help to Buy loan, you have a couple of options:

1. Remortgage to a Standard Mortgage

You could remortgage your current loan (the initial 75%) while keeping the equity loan in place. This option might be appealing if you’re looking for a better mortgage rate or if your current deal is ending.

2. Remortgage to Pay Off the Equity Loan

Alternatively, you could remortgage for a larger amount and use the additional funds to pay off all or part of the equity loan. This could be a viable option if your property has increased in value or if you have sufficient equity.

Things to Consider

  • Lender Restrictions: Not all lenders offer remortgaging for Help to Buy properties, so your choices may be limited.
  • Loan-to-Value (LTV) Ratios: The amount you can borrow will depend on the LTV ratio, which could be affected by how much of your equity loan you’ve paid off and any changes in your property’s value.
  • Interest Rates: Depending on the market and your personal circumstances, remortgaging can either increase or decrease your interest rates.
  • Early Repayment Charges: Check if there are any early repayment charges on your current mortgage if you are considering remortgaging before the end of your deal.

Process of Remortgaging

  1. Valuation: You’ll need to get your property valued as part of the remortgaging process. This will determine how much you can borrow and the value of your equity loan.
  2. Advice: Consult with a mortgage advisor who understands the specifics of Help to Buy schemes. They can guide you on the best remortgaging strategy for your situation.
  3. Approval: Your new mortgage lender and the Help to Buy agent must approve your remortgaging plan, especially if you intend to pay off the equity loan.

Remortgaging with a Help to Buy equity loan in place is certainly possible, but it requires careful consideration of your financial situation, property value, and market conditions. Whether you’re looking to secure a better mortgage rate or aiming to pay off your equity loan, professional advice is key to navigating this process smoothly. As always, understanding the details of your current mortgage and the terms of your equity loan is essential in making an informed decision.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Houz Mortgages does not charge a fee for mortgage advice.

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