If you bought your home with a Help to Buy equity loan, at some point you’ve probably wondered… should I remortgage to pay it off?
As the interest-free period comes to an end and the government starts charging interest, many homeowners begin exploring the benefits of remortgaging.
The right decision will depend on your property’s value, your finances, and the remortgage options available to you.
If you’re nearing the end of your Help to Buy term, remortgaging can also be a smart way to access competitive remortgage deals, reduce your overall interest, and take a bigger step up the property ladder, especially if rising property prices have increased your home’s equity.
At The Mortgage Pod, we’ve helped hundreds of clients navigate the Help to Buy remortgage process. Here’s everything you need to know.
Is It Worth Remortgaging to Pay Off Help to Buy?
In many cases, yes – especially if your Help to Buy loan is approaching the five-year mark. That’s when the interest-free period ends and you’ll begin to pay interest on the equity loan.
Initially, this is 1.75% of the loan amount, but it increases every April in line with the Consumer Price Index (CPI), plus 2%. This can mean higher monthly repayments, especially as interest rates continue to rise.
By remortgaging, you may be able to access lower interest deals and reduce your overall loan repayment costs.
Plus, paying off the Help to Buy loan means you’ll own more of your property outright and can take full advantage of any future growth in market value.
Can You Remortgage to Pay Off a Help to Buy Equity Loan?
Yes, you can. Remortgaging to pay off your Help to Buy equity loan involves switching to a new mortgage with either your current lender or a new one, and increasing the loan size to cover the equity loan amount.
This mortgage pays off your original mortgage and the Help to Buy government loan.
Your equity loan percentage is based on your property’s current value, so you’ll need a new valuation before starting the remortgaging process.
Bear in mind:
- You’ll need a redemption letter from the Help to Buy administrator outlining your estimated repayment figure as well as an up to date RICS valuation.
- There’s an admin fee (typically £200) payable as part of the redemption process.
- Lenders require borrowers to meet standard lending criteria, including income, credit score, and loan to value (LTV) ratio.
Our mortgage brokers can help you find the best mortgage deal based on your circumstances and guide you through the full process.
What Is the Best Way to Pay Off an Equity Loan?
The best way to repay your Help to Buy loan depends on your financial situation.
Most people do it by:
- Remortgaging to release equity from their home and pay off the loan in full.
- Using savings to cover the equity loan amount.
- Paying off at least half if a full repayment isn’t feasible (partial redemptions are allowed in 10% increments).
Whichever option you choose, paying off your equity loan means you’ll stop paying interest on the government loan and any associated management fee.
It can also give you more mortgage options in future – especially if you’re planning structural alterations, or if your Help to Buy mortgage deal ends soon.
What Happens After 5 Years of a Help to Buy Equity Loan?
Once the five-year interest-free period ends, the government starts charging interest on your equity loan. At the time of writing this article, you’ll pay:
- 1.75% of your help to buy loan amount in year six
- Increased annually by the Retail Price Index (RPI) + 1%
You’ll also pay a monthly management fee of £1, on top of any interest. These higher monthly repayments can come as a shock, especially if you’re not prepared.
Remortgaging before these charges kick in is often a smart move.
Many lenders offer competitive remortgage deals for homeowners in this situation, and it can be a good time to consolidate your borrowing into one manageable monthly payment – ideally at a lower interest rate.
Should I Remortgage If I’m Still on the Help to Buy Scheme?
If you’re still part of the equity loan scheme, you might be wondering whether it’s better to stay on your current deal or switch things up.
Many homeowners find the Help to Buy remortgage process a bit confusing – especially when trying to weigh up the pros and cons of staying on the buy equity loan scheme long term.
Here’s what to consider:
- If you buy property using Help to Buy, you technically own only part of your home until the equity loan is repaid. That can limit your options when it comes to refinancing or selling later.
- After five years, you’re no longer interest-free, and payments on the equity loan scheme begin to add up. If your property value has gone up, the amount you owe also increases – this is based on a percentage, not the original loan figure.
- Staying on the buy scheme for too long could end up costing more in the long term, especially as interest rates rise and management fees continue.
- If you’re in or near negative equity, you may find that your options for remortgaging are limited. However, partial repayments or strategic refinancing might still be possible – this is where tailored advice becomes essential.
If you’re looking to buy property again in future or move up the ladder, it’s often worth exploring whether a Help to Buy remortgage could put you in a stronger position, reduce your costs, or even improve your borrowing power with a new lender.
The good news? You don’t have to figure it all out on your own. At The Mortgage Pod, we’ll help you explore the pros and cons based on your specific equity loan percentage, home value, and financial goals.
What to Consider Before Remortgaging
Before remortgaging to repay your Help to Buy equity loan, you’ll want to:
- Check your property’s value – You’ll need a new RICS valuation to calculate how much you owe.
- Review your credit score and mortgage repayments history.
- Consider your mortgage term and whether you want to extend or shorten it.
- Speak to a mortgage broker – Especially one who understands the Help to Buy scheme and can compare remortgage deals across many lenders.
- Think about future plans – Including whether you plan to move, build more equity, or borrow more money down the line.
How The Mortgage Pod Can Help
We’re here to make the Help to Buy remortgage journey as simple and stress-free as possible.
Whether you’re aiming to reduce your mortgage payments, buy out your equity loan, or climb further up the property ladder, we’ll match you with the right lender, the right mortgage product, and a strategy that supports your long-term financial goals.
We’ll also liaise with your Help to Buy customer service team, assist with redemption letters, and support you through each step of the remortgaging process.
Ready to Explore Your Options?
If you’re thinking about paying off your Help to Buy loan and want to know whether now’s the right time to remortgage, we’re here to help.
Speak to The Mortgage Pod today for personalised advice on Help to Buy, access to top remortgage deals, and expert guidance every step of the way.
FAQs About Remortgaging to Pay Off a Help to Buy Loan
Can I remortgage if I’m in negative equity?
This can be difficult, as most lenders require equity in your home to approve a remortgage. Falling property prices can push you into negative equity, which limits your options. However, it’s worth speaking to a mortgage adviser to see whether a Help to Buy remortgage or partial redemption might still be possible.
What if I’m in mortgage arrears or have leasehold issues?
You’ll need to resolve any leasehold or mortgage arrears before completing the Help to Buy redemption. Lenders will usually expect clean credit and up-to-date payments before offering deals, and you may also need to pay any administration fee due before your completion date.
Can I pay just part of my Help to Buy loan?
Yes. The buy equity loan scheme allows you to repay the government loan in 10% chunks of your property’s current value, which is calculated using a RICS valuation. Partial repayments can reduce your interest payments and help you secure a lower LTV mortgage in future.
Will I need a new valuation?
Yes, both the Help to Buy administrator and most mortgage lenders will ask for a recent RICS valuation. This confirms your property’s value and is used to calculate the value ratio for your new mortgage and the amount you owe on the equity loan.
What if I can’t get a bigger mortgage?
If you’re not eligible for a bigger mortgage, you could consider repaying part of the loan now and the rest later. Improving your credit profile, increasing your income, or waiting for house prices to rise may also help you borrow more money. Some borrowers opt to switch to their lender’s standard variable rate temporarily until a better option becomes available.
What happens if house prices fall before I remortgage?
Falling property prices can reduce your equity and affect your ability to remortgage or repay the equity loan. In this case, it’s important to explore alternative solutions with a broker, such as adjusting your mortgage term or reviewing specialist lenders that accept lower equity levels.
Do I have to pay admin fees when repaying the loan?
Yes. You’ll typically need to pay admin costs when repaying your Help to Buy loan. This includes an administration fee (usually around £200) and any valuation or solicitor fees needed to complete the buy property redemption process.
