Remortgaging to Repay Your Help to Buy Loan – How ORJ can help
Categories: Conveyancing, New Build, PropertyRemortgaging to Repay Your Help to Buy Loan – How ORJ can help
If you purchased your home using the Help to Buy equity loan scheme, you may now be considering your options as your circumstances change. Many homeowners reach a stage where remortgaging to repay their Help to Buy loan becomes an attractive and financially sensible option.
As solicitors experienced in residential property and mortgage transactions, we regularly assist clients through this process. In this article, we explain what remortgaging to repay a Help to Buy loan involves, the legal considerations, and how we can support you from start to finish.
What is a Help to Buy Equity Loan?
A Help to Buy equity loan is a government-backed scheme designed to help people purchase a new-build home with a smaller upfront deposit. The loans were introduced to make home ownership more accessible, as the scheme allowed buyers to borrow a percentage of the property’s value as an equity loan, in addition to their mortgage.
The Help to Buy scheme was well used but closed to new applications in October 2022 and ended in March 2023. Wales has its own Help to Buy Wales scheme, which at the time of writing, remains available.
Under the Help to Buy scheme, buyers typically contributed a minimum 5% cash deposit, with the government providing an equity loan of up to 20% of the property value (or up to 40% in London). The remaining amount was covered by a mortgage from a traditional lender.
Unlike a standard loan, the Help to Buy equity loan was secured against your property and repaid as a percentage of the property’s value, not as a fixed sum. This means the amount you repay can increase or decrease depending on how much your home is worth at the time you choose to repay it.
One of the key features of a Help to Buy equity loan is that it is interest-free for the first five years. During this period, homeowners are only required to pay a £1.00 monthly management fee and no interest. From year six onwards, interest is payable and then increases each April using either RPI+1% (2013–2021 loans) or CPI+2% (2021–2023 loans. For many homeowners, this rising cost is a key reason for choosing to repay the Help to Buy loan through remortgaging as a way of reducing long term costs and simplifying.
It is also important to understand that the government holds a legal charge over the property until the equity loan is fully repaid. This means you cannot sell your home or remortgage without addressing the Help to Buy loan as part of the process. Any repayment must follow strict rules set by Homes England (or the relevant Help to Buy administrator), including obtaining an independent property valuation and using a solicitor to complete the legal work.
For homeowners approaching the end of the interest-free period, or those whose financial circumstances have improved, repaying the Help to Buy equity loan can be a smart financial decision. However, because the repayment amount is tied to your property’s value and involves a formal legal process, it is important to fully understand how the scheme works before taking the next step.
Why Remortgage to Repay the Help to Buy Loan?
For many homeowners, remortgaging provides an ideal opportunity to repay their Help to Buy equity loan in full. As your circumstances change and your property value increases, continuing with the Help to Buy loan may no longer be the most cost-effective option.
One of the most common reasons people choose to repay their Help to Buy loan is to avoid rising interest charges. While the loan is interest-free for the first five years, as interest becomes payable from year six onwards and increases annually homeowners have future monthly charges to manage. Over time, these charges can significantly add to your monthly outgoings, making repayment through remortgaging a financially sensible choice.
Another key benefit is access to a wider range of mortgage products. Lenders can sometimes be more limited in the mortgage deals they offer for properties with a Help to Buy equity loan. By repaying the loan, you may be able to secure more competitive interest rates or move to a lender that better suits your long-term financial goals. By combining your existing mortgage balance and the Help to Buy loan into a single new mortgage, you may achieve greater financial certainty and flexibility.
Repaying your Help to Buy equity loan can also give you full ownership of your property. Once the loan is cleared, the government’s legal charge is removed, meaning your home is no longer subject to Help to Buy restrictions. This often provides greater peace of mind and more flexibility in the future, whether you plan to sell, remortgage again, or make changes to your property.
Many homeowners also choose to repay their Help to Buy loan when their property has increased in value and their loan-to-value ratio has improved. This can place you in a stronger position when remortgaging, potentially reducing your mortgage rate and improving overall affordability.
While remortgaging to repay a Help to Buy loan can offer clear financial and practical advantages, it is not a decision to take lightly. The repayment amount is based on your property’s current value, and the process involves specific legal and administrative steps. Taking professional advice ensures the process is handled correctly and helps avoid unexpected delays or costs.
The Legal Process Explained
Repaying a Help to Buy loan involves several steps and is more complex than a standard remortgage as the loan is tied to your property. It involves additional documentation and coordination with Homes England (or the relevant Help to Buy administrator). Understanding the process and consulting specialist legal support. can help ensure everything runs smoothly
Step 1 – Obtaining a RICS Valuation
The first step is you must instruct a surveyor registered with the Royal Institution of Chartered Surveyors (RICS) to provide an independent valuation of your property. This determines how much you must repay. The Help to Buy loan repayment is calculated as a percentage of your home’s current market value, so the valuation directly impacts how much you will need to repay.
It’s important to note that the valuation must be conducted to Homes England or the relevant administrator’s standards, as an inaccurate valuation can delay the repayment process.
Homes England require the valuation to meet specific criteria (not a mortgage valuation), and you must notify them of any factors that could affect value (e.g., cladding/planning/building regs issues) before instructing the surveyor.
The report is valid for 3 months from the date it was issued.
Step 2 – Applying for Redemption and obtaining authority
Once the valuation has been obtained, you need to submit a formal repayment application to Homes England (or the relevant Help to Buy administrator), together with the RICS valuation and the required administration fee.
Homes England will review the application and, if everything is in order, issue an Authority to Proceed (ATP) to your solicitor. This confirms the calculated repayment amount based on your property’s current market value and outlines the conditions that must be satisfied before completion can take place.
Unlike a traditional loan, the Help to Buy equity loan is repaid as a percentage of your property’s current value. This means the repayment amount will rise or fall in line with the market. If your home has increased in value since purchase, the amount required to redeem the loan may be higher than the original sum borrowed.
When you are ready to complete your remortgage, your solicitor provides a formal legal undertaking to Homes England confirming that the equity loan will be repaid on completion. Homes England will then issue the Authority to Complete (ATC), which authorises the transaction to proceed and allows completion to take place.
Step 3 – Mortgage Lender Requirements
After confirming the repayment amount, you’ll need to apply for a new mortgage to cover both the repayment of the Help to Buy loan and any remaining mortgage balance. Some lenders have additional criteria or fewer product options when an equity loan is in place, so choosing a lender with experience in these cases is crucial.
Your mortgage lender will need to approve the application and issue a new mortgage offer. Your solicitor checks the terms and ensures they are compatible with the Help to Buy redemption process.
Step 4 – Completion and Registration
On completion day, your solicitor repays the Help to Buy loan and your existing mortgage from the new mortgage funds. We then register the removal of Help to Buy’s charge at the Land Registry.
Each stage must be handled carefully to avoid delays or additional costs.
Do you need a solicitor to repay a Help to Buy Loan?
In short, yes! Using a solicitor is essential when repaying your Help to Buy equity loan because the loan is secured against your property, and the repayment process involves a number of legal steps that must be completed correctly to avoid delays, additional costs, or mistakes that could impact your home ownership.
A solicitor’s role in repaying a Help to Buy loan includes:
- Coordinating with Homes England or the relevant Help to Buy administrator: They ensure the repayment complies with all legal and administrative requirements.
- Handling the redemption of the loan: The solicitor formally processes the repayment and ensures that the government’s legal charge on your property is removed.
- Liaising with your mortgage lender: Your solicitor communicates with your lender to ensure funds are released at the right time, making the remortgage process seamless.
- Updating the Land Registry: Once the loan is repaid, your solicitor ensures the Land Registry reflects full ownership of the property.
Even if you are confident managing paperwork and mortgage applications yourself, the Help to Buy repayment process is legally binding and involves precise documentation. Mistakes in the process, such as errors in valuations, incomplete legal forms, or miscommunication with lenders, can result in delays or unexpected costs.
Working with an experienced property solicitor not only ensures the process is completed correctly but also provides peace of mind, knowing that you are fully compliant with the rules of the Help to Buy scheme.
Common Mistakes When Repaying a Help to Buy Loan
Repaying your Help to Buy equity loan may seem straightforward, but there are several common pitfalls that homeowners can encounter. Understanding these mistakes ahead of time can save both time and money, and working with an experienced solicitor ensures the process goes smoothly.
1. Incorrect Valuation Reports
The repayment amount for a Help to Buy loan is calculated as a percentage of your property’s current market value. An inaccurate or outdated valuation can lead to overpayment or delays in completing your remortgage. We recommend you should always use a RICS-qualified surveyor approved by Homes England.
2. Missing Key Deadlines
The Help to Buy scheme has specific timelines for repayments and remortgages. Failing to coordinate the repayment with your lender or solicitor can result in delays or additional fees. Planning ahead and starting the process early is essential.
3. Choosing a Solicitor Without Help to Buy Experience
Not all property solicitors are familiar with the Help to Buy repayment process. Using a solicitor without relevant experience or expired authority to completed documents can lead to errors in documentation, missed requirements, or complications with the Land Registry. Specialist knowledge ensures the process is completed correctly the first time.
4. Underestimating Costs
Many homeowners focus solely on the equity loan repayment itself, overlooking associated costs such as valuation fees, legal fees, or mortgage arrangement fees. Preparing a full budget for the remortgage process helps avoid unexpected surprises.
5. Poor Communication Between Parties
Repaying a Help to Buy loan involves coordination between your mortgage lender, the Help to Buy administrator, and your solicitor. Miscommunication or delays from any party can slow down the process or create compliance issues. A solicitor experienced in Help to Buy repayments acts as the central point of contact, keeping everything on track and ensure lender conditions are always satisfied.
How can ORJ Help with Your Help to Buy Remortgage
At ORJ, our experience allows us to anticipate and resolve these problems early, helping your transaction progress smoothly. Specifically, we can:
- Advise you on the overall process and likely timescales
- Liaise with Help to Buy administrators
- Review and explain your mortgage offer
- Handle all legal documentation
- Redeem your existing mortgage and Help to Buy loan
- Register updated ownership and charges at the Land Registry
Timing and Planning
Valuations are valid for 3 months. Your completion date must also align with your mortgage offer expiry and the Authority to Complete.
Coordinating these deadlines is essential to avoid having to repeat steps or incur extra costs.
We work closely with you, your mortgage adviser, and your lender to ensure everything aligns.
Transparent Cost & Communication
We provide clear information about our legal fees and anticipated disbursements from the outset, so you know exactly what to expect to ensure there are no hidden surprises.
Our role is to manage the entire legal process on your behalf, ensuring everything is completed accurately, efficiently, and in compliance with both lender and Help to Buy requirements.
We act as a single point of contact, keeping you informed at every stage and answering any questions you may have.
Take the Next Step with Confidence
Remortgaging to repay your Help to Buy loan can be a positive step towards long-term financial security and full ownership of your home. With the right legal support, the process can be straightforward and stress-free.
If you are considering repaying your Help to Buy loan or would like to explore your options, our experienced property solicitors are here to help. Contact us today for an initial discussion and find out how we can support you through every stage of your remortgage.