Is Remortgaging a Help-to-Buy Property an Option?

Lois Zaytsaw
Lois Zaytsaw Finance
9 Min Read

Help-to-Buy programs, which provide low-deposit mortgages and government-backed equity loans, have proven to be a popular choice for many first-time purchasers trying to climb the housing ladder. However, many homeowners might experience higher monthly mortgage payments as the initial five-year interest-free period ends. Remortgaging is a choice to think about, but what about houses that are part of the Help-to-Buy program? This blog post will examine the viability of remortgaging a Help-to-Buy property and what you should consider before deciding.

Let’s Begin by Understanding Help-to-Buy Scheme:

The government’s Help-to-Buy program aims to make it easier for first-time buyers and people who are moving into new homes to buy a new home with as little as a 5% down payment.

Through the program, the government offers equity loans of up to 20% (or 40% in London) of the property’s value to assist buyers in obtaining a mortgage with a cheaper interest rate. The equity loan is interest-free for the first five years; after that, interest is charged at 1.75%, increasing yearly by the inflation rate plus 1%. A new construction home with a purchase price of up to £600,000 is required to qualify for the program. Additionally, the buyer must be the sole owner of the property at the time of purchase.

The Help-to-Buy program is offered throughout England, Scotland, and Wales, with a few minor variations in eligibility requirements and permitted property valuations. Understanding that the Help-to-Buy program is not a grant or a freebie is crucial. The equity loan is due in full upon the sale of the property or after the mortgage term, whichever occurs first.

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Now Let’s Talk About What Remortgaging Is:

Changing your current mortgage to a new lender or a new mortgage package with your current lender is known as remortgaging. Remortgaging is mostly done to liberate equity from your house or to reduce monthly mortgage payments.

Here’s how it works: When you remortgage, you use the money from your new mortgage to pay down your old one. Compared to your current mortgage, this new one might have a lower interest rate, a longer or shorter term, or different repayment terms. If you decide to release equity, you can borrow more money against the value of your house to pay for renovations or other costs.

Remortgaging can have a lot of advantages. Remortgaging could help you save money by switching to a cheaper interest rate, for instance, if your fixed-rate mortgage has expired and your contract is no longer in effect. You might be able to lower your monthly mortgage payments as a result, which would leave you with extra money to spend on other things. Remortgaging can also assist with debt consolidation, equity release, and more repayment flexibility.

It’s crucial to remember that remortgaging could incur costs, such as arrangement fees, legal expenses, and appraisal fees. When deciding whether to remortgage, it’s important to consider these fees and compare them to any potential advantages to see if it’s the best option for you.

So, Can You Remortgage a Help-to-Buy Property?

Yes, you can remortgage a Help-to-Buy property, but there are certain things you need to consider before doing so.

First off, if you have a government equity loan, you should be aware that your debt will grow as the value of your property rises. This is so that if the property’s value has increased, so has the amount you borrowed, as the equity loan is a proportion of the property’s worth. You could therefore need to remortgage for a bigger sum to pay down the bigger equity loan.

The conditions of your equity loan should also be taken into account. You will be required to repay the equity loan with annual interest after the initial five years of interest-free use. When deciding whether to remortgage, you must consider the cost of the equity loan repayments.

Thirdly, you must determine whether there are any early repayment penalties in your present mortgage agreement. If so, you must consider these costs when determining whether refinancing is cost-effective.

Last but not least, be certain that you are qualified to refinance. This entails having a solid credit history, being able to make new mortgage payments, and owning enough equity in the home.

Overall, it is possible to remortgage a Help-to-Buy property, but you must carefully weigh the advantages and disadvantages before choosing this course of action. It could be a good idea to consult with a financial counselor to acquire advice specific to your situation.

How to Remortgage Help-to-Buy Property?

Remortgaging a Help-to-Buy property is similar to remortgaging any other property, but there are a few additional factors to consider. Here are the steps you need to follow:

  1. Check the terms of your Help-to-Buy equity loan: You should review the conditions of your Help-to-Buy equity loan before remortgaging. The interest rates and loan repayment terms for the equity loan must be understood because they will have an impact on the total cost of the refinance.
  2. Check your eligibility: You must determine if you meet the requirements for remortgaging. This entails having a solid credit history, being able to make new mortgage payments, and owning enough equity in the home.
  3. Shop around for the best remortgage deals: You should compare refinancing offers from different lenders. You can consult comparison websites or talk to a mortgage broker to locate the best offer.
  4. Choose the right mortgage deal: Once you’ve found a remortgage deal that works for you, you should decide which mortgage to get based on your goals and financial situation. Think about the mortgage’s interest rate, duration of repayment, and any additional costs.
  5. Apply for the remortgage: After selecting a mortgage option, you must submit a remortgage application. Details about your present mortgage and financial condition, including your income and expenses, must be provided.
  6. Complete the remortgage: You must finish the remortgage after your application is authorized. This entails acknowledging the mortgage contract and paying any refinancing fees.
  7. Pay off your Help-to-Buy equity loan: To pay off your Help-to-Buy equity loan through a refinance, you must ensure that the necessary funds are available. You can accomplish this by paying off the debt entirely or by paying it off with money from the new mortgage.

It’s important to keep in mind that remortgaging a Help-to-Buy property is a substantial financial choice; therefore, it’s crucial to thoroughly weigh the costs and advantages before deciding. To acquire advice specific to your situation, it could be a good idea to talk to a financial advisor or mortgage broker.

To Sum Up:

In conclusion, it is possible to remortgage a Help-to-Buy property, but it is crucial to thoroughly weigh the advantages and disadvantages before choosing this course of action. The terms of the equity loan, your eligibility, the top mortgage offers available, and the remortgage fees must all be taken into consideration. Remortgaging may enable you to reduce your monthly mortgage payments, pay off an equity loan early, or release equity from your property with careful preparation and expert assistance. Remortgaging, however, is a huge financial decision, so it’s crucial to be sure it’s the best option for your particular situation before moving further.

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Lois Zaytsaw
By Lois Zaytsaw Content Editor, Financial Writer
Meet Lois, a dynamic Crypto, Blockchain, and Finance Writer/Journalist based in the bustling metropolis of New York City. With a passion for technology and a keen understanding of finance, Lois has been covering the latest developments in the world of cryptocurrency and blockchain for several years. Her insightful articles have been featured in numerous leading publications, including The Wall Street Journal, Bloomberg, and CryptoBriefing. Lois' fascination with blockchain and cryptocurrency began during her time as a student at university, where she studied economics and computer science. She was drawn to the disruptive potential of blockchain technology to revolutionize the traditional financial industry, and since then, she has been following the latest trends and innovations in the space.
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