Help to Buy (Wales Only) remortgage

How Help to Buy worked

You bought a new build with a 5% deposit, a 75% mortgage, and a 20% (or 40% in London) Help to Buy (Wales Only) equity loan from the government. The equity loan was interest-free for the first five years. From year six, interest is charged on the loan balance, starting at 1.75% and rising annually with the Retail Price Index plus 1%.

Remortgaging at year five

Most Help to Buy borrowers reach the end of their initial fixed mortgage rate around year five. The natural decision point is to remortgage onto a new product before the equity loan starts charging interest. Some lenders offer specific Help to Buy (Wales Only) remortgage products. The mortgage and the equity loan are kept separate.

Staircasing out

You can repay the equity loan in part (minimum 10% of property value) or in full. The property is revalued at the time of repayment, so the cost is 20% of today value, not 20% of the original purchase price. If your property has appreciated, you pay more than you borrowed. If it has fallen, you pay less.

Worked example, full repayment of a 20% equity loan

You bought a new build at £280,000 with a 20% equity loan of £56,000. Five years later the property is valued at £330,000. The equity loan repayment is 20% of £330,000, which is £66,000. You owe £10,000 more than you borrowed. To repay you need a remortgage that covers your existing first mortgage plus £66,000 plus any release fees. On a property at £330,000 with a £200,000 first mortgage, the new total of £266,000 is roughly 81% LTV, which is workable on a wide pool of lenders. We model both routes (full staircase versus partial) on the actual numbers.

Combining remortgage and staircasing

The cleanest route is to remortgage the main loan and stair-case out (in part or in full) at the same time. Several lenders specifically support this combined transaction. We coordinate the lender, the solicitor and Target HCA so the three pieces land together.

If you cannot afford to repay yet

You can keep the equity loan and pay the rising interest, then revisit the staircasing decision later. The interest is monthly and modest in the early years. The risk is that the loan balance rises with property prices, so deferring can cost you more later. The interest charge starts at 1.75% in year 6, rises with RPI plus 1% annually, so by year 10 the rate is typically 2.5% to 3.5%.

Why timing matters

Property valuation is set on the date of repayment. If the market is rising, waiting costs you more. If it is flat or falling, waiting costs you less. We help you read the realistic local market trajectory rather than guess. The interest cost on the equity loan in years 6 to 10 is usually less than the property appreciation cost on the equity loan balance, so deferring rarely saves money in a rising market.

Common pitfalls we see

Letting the year-five date pass without action and finding the equity loan starts charging interest while you still have a fixed first mortgage that does not let you remortgage without an early repayment charge (ERC). Picking a lender that does not support combined remortgage and staircasing, leading to a two-step transaction with extra fees. Underestimating the cost of the year-five revaluation. Forgetting that Target HCA need 4 to 6 weeks lead time on the redemption statement and final figures. We diary the five-year date months in advance.