The Help to Buy Equity loan scheme launched in April 2013 and in this post we explore the question of whether you can remortgage and pay off a Help To Buy Equity loan with Bad credit.
The idea behind the loan was that it would provide an interest free loan for 5 years for up to 20% of the purchase price, this helped get the Loan to Value down and increase mortgage lending at a time when the market was being conservative with what the risk it wanted to take on.
As the first of those loans are now coming up to 6 years old and we are receiving more enquiries about what options are out there for someone with bad credit, I thought it would be worthwhile to make a post on what we can do.
The Equity loan
Whilst this post is geared towards the Help to Buy equity loan, the principle should be the same for any other similar equity loan schemes. Most of these loans were taken out for those with small deposits and so the biggest issue when trying to remortgage and pay off the equity loan with bad credit could be a lack of equity.
What information do we need?
We need to know what Bad Credit it is we are trying to overcome. There are a few exceptions to the rule with this but in the main when trying to remortgage and pay off the Help to Buy equity loan with Bad Credit, the options are broadly the same as any other type of remortgage with bad credit.
Firstly, we need to know how much equity there will be in the property. As a general rule of thumb, if the adverse is within the last 3 years, you would probably need 10-15% equity. If over 3 years then we can potentially look at less.
We also need to know what Adverse there is.
Defaults: If there is a one off small default that is either a year or 2 old and/or satisfied, we could be looking at 5-10% equity and normal rates. If there are a couple of Defaults within the last 3 years, then we are probably looking at 10-15%.
CCJs: Fairly similar to Defaults but generally looked on a little more harshly than Defaults.
Debt Management Plans: Paying of the Help to Buy equity loan whilst in a DMP is another one that can be overcome, but generally speaking you would need to have been in it for at least 12 months (possibly longer) you would also typically need 15-20% equity – although subject to affordability, the DMP can remain and would not need to be cleared as part of the remortgage.
IVAs/Bankruptcy: Another one that can be overcome, but generally speaking this will need time (typically 3 years discharged) and equity, as a minimum we would be looking for 10% but it could be more.
Knowing the Adverse issues and the equity combined will enable us to determine if it is likely we can help you with a bad credit remortgage or not. Hopefully you will now have more equity having made mortgage repayments for 4-5 years and potentially house price values in your area could have increased meaning there is the ability to overcome the adverse and pay off the Help to Buy equity loan.
What will we do?
As it is becoming more and more common for these HTB equity loans coming to the end of their interest free period, there are more and more options out there.
We will discuss your circumstances with you to understand what the issues are and likely options before going off to do the research properly and discuss your circumstances (anonymously) with the lenders.
Once we have come back to you with an accurate idea of your options, if you are happy to proceed we can then get everything together and make an applications. We will deal with the underwriters and the lenders on your behalf and deal with any queries or problems that may arise.
If you want to know more on whether you can remortgage & Pay of HTB Equity loan with Bad credit, please get in touch.
We are happy to have a 10-15 minute chat to understand your situation and see if we think we can help and likely rates/products available.