Repaying Your Help to Buy Loan With A Remortgage
Navigating Your Help to Buy Loan: A Practical Guide to Remortgaging
Your home may be repossessed if you do not keep up repayments on your mortgage.
A fee of up to £495 per mortgage may be charged depending on individual circumstances.
The information contained within was correct at the time of publication but is subject to change.
10th March 2025
The Help to Buy scheme has helped countless individuals and families achieve their dream of homeownership. However, as the initial five-year interest-free period comes to an end, many homeowners find themselves considering their options for repaying the equity loan. Recently, I had the privilege of assisting a long-standing client through this very process, and I'd like to share their experience to help you understand the potential benefits of remortgaging to repay your Help to Buy loan.
This blog post will walk you through a real-life scenario, outlining the challenges and opportunities involved in repaying a Help to Buy loan through remortgaging. We'll explore how fluctuating property values can impact your loan repayment, and demonstrate how strategic financial planning can provide long-term peace of mind.
Their Scenario
Seven years ago, my clients purchased a new build property for £238,000, utilising a 20% Help to Buy equity loan of £47,600. Fast forward to today, their current two-year fixed-rate mortgage is nearing its end, and they were keen to explore their options for repaying the Help to Buy loan.
As many homeowners know, the Help to Buy loan repayment is based on the current market value of your property. With property prices generally on the rise, my clients were understandably concerned about the potential increase in their repayment amount if they delayed. A valuation from their existing lender indicated their property was now worth approximately £310,000, meaning their Help to Buy loan had increased to roughly £62,000 – a significant rise of £14,400. Additionally, they were paying £77.29 per month in interest on the loan.
My clients are a hardworking family with children, managing their finances prudently. While they could comfortably afford their existing mortgage and the Help to Buy interest payments, they were mindful of their long-term financial stability. They recognised that delaying repayment could lead to a larger loan amount in the future, especially if property values continued to climb.
Mortgage Solution
We conducted a thorough review of their options, considering both staying with their existing lender and exploring remortgaging with a new provider.
- Staying with the Existing Lender: Their current lender offered a new five-year fixed-rate mortgage at 4.26%, with no fees, resulting in monthly payments of £737.20. When combined with the £77.29 monthly Help to Buy interest payment, the total monthly cost would be £814.49. However, this option would not address the outstanding £62,000 Help to Buy loan.
- Remortgaging with a New Lender: After researching the market, we found that Nationwide offered a competitive remortgage package that allowed them to consolidate the Help to Buy loan. By incorporating the £62,000 loan into the new mortgage, the loan-to-value (LTV) ratio increased, resulting in a slightly higher interest rate of 4.24%. The product included a £999 fee, added to the mortgage, and an APRC of 6.50%. This resulted in monthly mortgage payments of £1,010.57.
While the monthly payment was £196.08 higher than the option with their existing lender, it eliminated the £62,000 Help to Buy loan and the associated monthly interest payments. For my clients, this trade-off provided significant long-term financial security and peace of mind.
The application process with Nationwide was streamlined, requiring only three months of payslips and bank statements for both applicants. Additionally, the product included £500 cashback, which my clients used to cover the costs of their chosen conveyancers for the remortgage and Help to Buy loan repayment.
By remortgaging, my clients effectively eliminated their Help to Buy loan, securing their financial future and avoiding the potential for a larger repayment in the years to come. This case highlights the importance of exploring all available options and seeking professional advice when navigating the complexities of Help to Buy loan repayments.
If your Help to Buy interest-free period is nearing its end and you're considering a remortgage, it's crucial to explore your options for the equity loan. Whether repaying it now makes financial sense, or if keeping it outstanding is a better strategy, we can help you navigate this decision. Don't hesitate to reach out – simply complete the form below, and we'll provide personalised guidance tailored to your unique situation.