Remortgaging a Help to Buy and Shared Ownership property - what happens after the offer is issued?
Our guide 'I've got my mortgage offer, what happens next?' explains the next steps and the role of your conveyancer.
If you’ve previously bought your home using either a Help to Buy equity loan or the Shared Ownership scheme, there are usually a few more legal hoops to jump through when you come to remortgage.
This is because with Help to Buy, the Government is entitled to a share of the future sale proceeds equal to the percentage of the equity loan borrowed, and with Shared Ownership, the property is partly owned by the local authority or a housing association.
Here, we explain how the legal process works for each of these schemes.
Help to Buy
The Help to Buy scheme enables buyers to put down a 5% deposit, with the Government providing a 20% equity loan (40% if buying in London) which is interest free for the first five years.
When you come to remortgage, the Home and Communities Agency (HCA) must be notified by your conveyancer. They’ll need to agree to your new lender securing a loan against the property, as they have a legal charge on your home and need to protect their interest in it. A charge means a lender or loan provider has a registered legal interest in your property until the debt is repaid.
Your conveyancer must provide the HCA with information about the new lender along with details of the new loan. They’ll also have to ask permission from the HCA for the remortgage to proceed.
There are strict criteria laid down by the Help to Buy scheme about remortgaging, so your conveyancer must confirm that all the relevant conditions are being met.
To remortgage a Help to Buy property, your conveyancer must supply the Help to Buy scheme administrator with a legal document known as a ‘Deed of Postponement’. This allows the mortgage to become the first charge registered on the property, and the equity loan to remain as the second charge. Essentially this means that the mortgage lender has the first claim on your property in the event you can’t repay your debts.
This can all take time to arrange and reach agreement, so your conveyancing costs will be higher to account for this work. The Help to Buy loan provider will also usually charge a fee of around £96-£115 for agreeing to postpone the loan charge.
As the legal process for Help to Buy remortgages is more complicated than for standard residential remortgages, timescales tend to be slightly longer, and it will typically take six weeks from offer to completion.
Shared OwnershipShared Ownership properties are usually owned on a leasehold basis, with you owning a percentage of your home and a housing association owning the rest of your property.
Leasehold remortgages require whoever is carrying out your conveyancing to do some additional checks that aren’t necessary if you’re remortgaging a freehold property. For example, your conveyancer will need statements showing how much your ground rent and service charges are and will want to know whether these are likely to increase in the next couple of years. Find out more about the legal process for leasehold remortgages here.
Where Shared Ownership is involved, additional checks will be required as the local authority or housing association will have a registered legal interest in the property. This will be noted in your lease and at the Land Registry.
When you remortgage, your conveyancer must contact your local authority or housing association and let them know about your plans to remortgage and that a new lender will take first charge on the property. They’ll need to know details of your new loan and must provide permission for the remortgage to proceed.
This can all take time to arrange and reach agreement, so your conveyancing costs will be higher than if you were remortgaging and own your property outright. There may also be charges from your local authority or housing association for work at their end.
As a general rule, remortgaging a Shared Ownership property will typically take around six weeks from offer to completion, compared to about four weeks for a standard residential remortgage.