Remortgaging a Help to Buy Home to Repay the Equity Loan

A Help to Buy equity loan is repaid as a percentage of what your home is worth when you repay, not the amount you originally borrowed. The government's equity loan repayment guide is explicit that the amount is based on the current market value at the time you choose to repay, so if your home has risen in value, the debt has risen with it. Everything else about remortgaging a Help to Buy home in England follows from that rule. This is general information rather than financial advice.

What repayment actually costs

Say you bought a new build for £300,000 with a 20% equity loan of £60,000. If the home is now valued at £340,000, clearing the loan costs 20% of £340,000, which is £68,000. Had the value fallen to £280,000, it would cost £56,000. Homes England charges a £200 administration fee for a full repayment on top.

Part repayment is allowed but lumpy. Each instalment must be at least 10% of the current market value, which is £34,000 on the £340,000 home, and you cannot leave less than 5% of the value outstanding.

The interest clock starts in year six

For five years the loan costs only a £1 monthly management fee. From the start of year six you pay interest at 1.75% of the original loan amount, and the government's page on equity loan interest confirms the rate then rises every April: by RPI plus 1% on the 2013 to 2021 scheme and CPI plus 2% on the 2021 to 2023 scheme. On the £60,000 loan that is £1,050 in the first chargeable year, or £87.50 a month.

The sting is that interest buys you nothing, because the payments do not reduce the loan by a penny. That is why so many owners aim to redeem around the five-year mark, which is conveniently when many fixed rates end too.

The valuation that controls the number

You cannot repay against your own estimate of the value. Homes England requires a valuation from a RICS surveyor who is independent of any estate agent, inspects the property inside, and supports the figure with comparable sales. The report is valid for three months from the date it is produced.

That three-month window is the trap in the process. Commission the valuation only once your mortgage offer and conveyancer are lined up, because if it expires before completion you pay for a fresh one, and in a rising market a fresh valuation means a larger repayment figure.

Three remortgage routes

Stay with your current lender without borrowing more: no permission from Homes England is needed, though the lender may require a deed of postponement.

Move to a new lender while keeping the loan: apply for permission and pay a £115 fee, as listed on the government's equity loan fees page, and the permission lasts six months. Fewer lenders accept a Homes England second charge, so the market is thinner.

Remortgage to borrow more and redeem: the full process, meaning the RICS valuation, an application, a conveyancer, the £200 fee and Homes England's authority to complete.

The third route is the popular one at the five-year point, and it is a proper legal transaction: your conveyancer gives Homes England an undertaking and the charge comes off the title at the Land Registry. Our separate article on when to remortgage covers the wider timing question. If you are redeeming this year, you can compare conveyancing quotes for the legal work alongside your mortgage offer.