By James Evans, Director, TouchPoint Mortgages.
Are you among the homeowners who took advantage of the Help to Buy Equity Loan scheme to get onto the property ladder? If your initial mortgage deal is coming to an end, or you’re considering changing your current deal, you might be contemplating how to remortgage with an existing Help to Buy Equity Loan. Remortgaging in this situation can seem complex, but with the right guidance, it can be navigated smoothly. Here’s how to proceed.
The Help to Buy Equity Loan scheme was introduced to help first-time buyers and existing homeowners purchase a new build home with as little as a 5% deposit. The government lends you up to 20% of the cost of your newly built home (40% in London), so you only need a mortgage for the remaining 75% (55% in London). It’s crucial to remember that this government loan is not interest-free forever. After the first five years, you’ll be charged interest on the loan, starting at 1.75% and rising annually by the Retail Prices Index (RPI) plus 1%.
1. Review Your Current Situation: Before you make any decisions, assess your current financial situation, the remaining balance on your Help to Buy Equity Loan, and the value of your property. This information will be vital as you explore your remortgaging options.
2. Decide on Your Goals: Are you looking to remortgage to get a better interest rate, or do you wish to pay off your equity loan partially or in full? Your goal will significantly influence the type of mortgage deal you should be looking for.
3. Speak to a Mortgage Advisor: Remortgaging with a Help to Buy Equity Loan involves more steps than a standard mortgage. Consulting with a mortgage advisor who has experience with Help to Buy remortgages can provide you with tailored advice and help you find the best deal.
4. Get Your Property Valued: Since the equity loan is a percentage of your property’s value, if your home’s value has changed, the amount you owe on the equity loan may have changed too. Getting an up-to-date valuation is crucial for understanding how much you need to borrow.
5. Consider Your Options: You can choose to remortgage your main mortgage while keeping the equity loan, pay off part of the equity loan, or repay it in full. Each option has different implications for your financial situation and may affect the type of mortgage deals you’re eligible for.
6. Apply for a Remortgage: Once you’ve decided on the best course of action, you can proceed with applying for a remortgage. If you’re paying off your equity loan in part or full, you’ll need to inform the Help to Buy agent and your lender.
7. Legal and Valuation Checks: Similar to your initial mortgage application, your new mortgage lender will conduct a valuation of your property and legal checks. This is to ensure everything is in order before finalizing the remortgage.
8. Completion: After all checks are done, and you’ve agreed to the terms of your new mortgage, you’ll move to completion. If you’re paying off your equity loan, the funds to repay it will typically be transferred directly from your new lender to the agency managing the Help to Buy loan.
Remortgaging with a Help to Buy Equity Loan requires careful consideration and planning. By understanding your options and seeking professional advice, you can make informed decisions that suit your financial goals. Whether you’re aiming to reduce your monthly payments, pay off your equity loan, or secure a better interest rate, the right approach can help you achieve your objectives efficiently and effectively.
If you’ve leveraged a Help to Buy Equity Loan to purchase your home, understanding the repayment process is crucial, especially if you’re planning to sell your property or remortgage. One of the key steps in this journey is getting your property accurately valued. This is where a Royal Institution of Chartered Surveyors (RICS) surveyor comes into play. Their valuation can significantly impact how much you will need to repay on your equity loan. Here’s why and how to go about getting your property valued by a RICS surveyor.
A RICS surveyor is a highly qualified professional who adheres to the strict standards set by the Royal Institution of Chartered Surveyors. When it comes to assessing the current market value of your property, a RICS surveyor provides an impartial, expert valuation that lenders, including those managing the Help to Buy Equity Loan scheme, trust and accept.
The Help to Buy Equity Loan scheme offers buyers up to 20% (40% in London) of a home’s purchase price as an equity loan, with the buyer needing to contribute at least a 5% deposit. The loan’s amount to be repaid is not a fixed sum but a percentage of your property’s current market value. This means if the value of your property increases, so does the amount you owe on the equity loan.
1. Engaging a RICS Surveyor: Start by finding a RICS-certified surveyor. You can search for qualified professionals on the RICS website. Ensure that the surveyor has experience with residential properties in your area for the most accurate valuation.
2. The Surveyor’s Visit: The surveyor will inspect your property, taking into account its size, condition, location, and any improvements or extensions you have made. They will also consider current market conditions and comparable property sales in your area.
3. Receiving Your Valuation Report: After their visit, the surveyor will provide you with a detailed valuation report. This report will give you the current market value of your property, which is crucial for determining how much you need to repay on your equity loan.
Fair Repayment: An accurate valuation ensures you repay a fair amount based on your property’s current value, not more or less than what’s due.
Financial Planning: Knowing the exact repayment amount helps with financial planning, especially if you’re considering selling your property or remortgaging.
Avoiding Disputes: An impartial, RICS-backed valuation is widely accepted and can prevent disputes over property value during the loan repayment process.
Once you have your RICS valuation, you can proceed with your plans, whether it’s selling your home, remortgaging, or repaying the equity loan. If repaying, you’ll need to inform your loan provider about the valuation and arrange for repayment based on the current market value.
The Help to Buy Equity Loan scheme has been a boon for many first-time buyers and home movers, providing an essential leg up onto the property ladder. However, when the time comes to repay the loan, whether due to selling your home, reaching the end of the interest-free period, or deciding to settle the loan early, it’s important to understand the associated costs. Here’s a comprehensive guide to the fees you might encounter during the repayment process.
An administration fee is payable directly to your Help to Buy agent when you decide to repay your equity loan. This fee covers the cost of processing your repayment request and the administrative work involved in closing your loan account. The fee can range between £200 and £400, depending on your agent and the complexity of your case. It’s essential to factor this cost into your budgeting plan, as it’s a fixed expense regardless of your property’s value or the amount you’re repaying.
Before repaying your equity loan, you’ll need to have your property valued by a Royal Institution of Chartered Surveyors (RICS) accredited surveyor. This valuation determines the current market value of your home, which in turn dictates the amount you need to repay, given that the equity loan is a percentage of your home’s value. Valuation costs can vary significantly, generally falling between £200 and £600. This variance is primarily due to factors like the size of your property, its location, and the surveyor’s rates. It’s advisable to obtain quotes from multiple surveyors to ensure you get the best value for your money.
Engaging a solicitor is a crucial step in the equity loan repayment process. They handle the legal aspects, including liaising with the Help to Buy agent, your mortgage lender, and ensuring that the repayment is executed correctly. Solicitor fees can vary widely based on the complexity of your case and the solicitor’s expertise. Generally, you can expect to pay between £500 and £1500. Given the significant range in potential costs, it’s beneficial to shop around and obtain quotes from different solicitors. Also, ensure you’re clear on what’s included in their fee to avoid any unexpected charges.
Preparing for the financial implications of repaying a Help to Buy Equity Loan is crucial. Start by requesting a settlement figure from your Help to Buy agent, which will include the administration fee. Next, gather quotes for valuation and legal services. This preparatory work will give you a clear picture of the total cost of repayment, enabling you to budget effectively and avoid any surprises.
Yes, there are circumstances under which your application to repay the Help to Buy Equity Loan can be declined. While the aim of the Help to Buy agency and your lender is to facilitate homeowners in successfully managing or repaying their loans, certain conditions must be met for repayment to proceed smoothly. Understanding these conditions can help you navigate potential hurdles. Here are some reasons your application to repay could be declined:
If the property valuation submitted with your repayment application does not meet the requirements of the Help to Buy agency or is significantly lower than market value, your application might be declined. Valuations must be carried out by a surveyor accredited by the Royal Institution of Chartered Surveyors (RICS), and the valuation report must accurately reflect the current market value of your property.
If there are any outstanding charges or liens against your property that could affect the equity position of the Help to Buy loan, your application to repay could be declined. It’s important to resolve any such issues before applying for repayment.
Incomplete or incorrect documentation can lead to the decline of your application. This includes missing signatures, incorrect financial information, or failing to provide required legal documents. Ensuring that your application and all accompanying documents are complete and accurate can help avoid delays or declines.
If there are significant financial irregularities or concerns about the source of funds for repayment, especially in large lump sum repayments, your application may be scrutinized more closely or declined. The Help to Buy agency may require evidence or assurance regarding the legitimacy and source of your funds to proceed.
Violating the terms and conditions of the Help to Buy Equity Loan scheme, such as unauthorized rental of the property (without converting to a Buy-to-Let mortgage and obtaining the necessary permissions), can result in your repayment application being declined. It’s crucial to adhere to all scheme rules throughout your loan period.
There is also a step by step guide available on the Government Website
If you want to speak to an Adviser at TouchPoint Mortgages about remortgaging your Help to Buy Equity Loan – get in touch with a member of the team and we will be happy to assist you.
Send your message and we will be in touch, alternatively you can book an appointment to chat to one of our team.
