Redemption through Remortgage


Redemption without selling

Having dealt with numerous valuations regarding the above process, it may be that the following content will help you decide how to proceed with your redemption based on some of the experiences that we have encountered with the redemption process for our clients.  The content is only an opinion from ourselves and it is important that you read and understand the relevant information pack regarding your particular scheme.

If you are considering repaying your equity loan by remortgage, then you will need to consider a number of differing issues.

Firstly, it is important to consider which Solicitors you will instruct.  We would advise that whichever legal party is considered that you confirm that they have the relevant experience of dealing with a Help To Buy redemption and understand the process and timescales involved.  In many cases Lenders will require you to use one of their panel Solicitors and this is an enquiry that you will need to make with the Solicitor recommended.

It is also important for you to consider taking advice from an Independent Financial Adviser as there may well be a number of differing options open to you for the Redemption process.

One of the reasons that you may have required your equity loan from the Government or the House Builder or indeed both, will be due to a lack of deposit and the issue that the lender has with regard to loan to value.  On the basis of a remortgage your Lender is likely to look specifically at the amount you wish to borrow against the projected value of your property.  On this basis the Help To Buy Valuation and the subsequent Lenders Valuation become critical to the process.

We have found that a number of lenders will consider a remortgage on the basis of their own HPI (House Price Indices).  This is an internal assessment of the value of your property carried out by the Lender themselves and it does not normally involve a further valuation on your property.  Your HPI Valuation may well exceed the actual valuation on the property from an RICS surveyor.  This is fundamentally because your RICS surveyor is required to take comparable evidence within close proximity to your property.  This evidence is based upon confirmed sales and will in the majority of the cases support the value of your property.  With regard to an HPI Valuation and this is based very geographically and loosely upon a regional increase in house prices taken by the Lenders over a certain amount of time, similar to a projection by one of the automated valuation models such as Zoopla or alike.

In the majority of cases, the HPI Valuations created by the Lenders are higher than the actual inspection carried out by an RICS surveyor.  This does however differ geographically as the Lenders forecast different growth patterns for different regions within the UK.  This HPI valuation process is usually considered if you are to remortgage with the same Lender and to re-pay your redemption accordingly.  It differs if you are to change Lenders as it is most likely that your new Lender will request a valuation to be carried out on your property by an RICS surveyor.

On this basis, there are two RICS Valuations which will be undertaken, both for two separate parties and both valuations not relevant or to be considered by each party.  With this in mind therefore, it would be prudent to consider running your redemption valuation alongside your remortgage as it is possible that these figures will differ, as both surveyors are under differing instructions to provide a valuation.

If the Lender’s surveyor is deemed to be lower than your Help To Buy Valuation, then it is possible that the Lender will be unable to generate an acceptable loan to value, which may consequently mean that through with a remortgage, you may be unable to pay your redemption.  If the Lender’s surveyor is the same as or greater than your Help To Buy Valuation, then it may well be that your loan to value will be acceptable, especially if there has been a value increase in your property since you originally purchased.

With this in mind, the process can be quite complex and we would strongly recommend that you deal with this process through, or certainly take advice from, an Independent Financial Adviser.

In a perfect world, both the valuations from the RICS surveyors should be pretty much the same but unfortunately opinions differ, differing comparable evidence may have been used and, as mentioned earlier, Lender’s surveyors have to take account of their specific instructions from their instructing Lender, Bank or Building Society.

In summary therefore, it may be prudent to instruct your Help to Buy surveyor to undertake the valuation as you begin the process of considering a remortgage. This will give you an indication of the value to be considered and this would hopefully give you an early indication as to whether the redemption was possible – and whether it was worthwhile proceeding with a remortgage application.

Another reason to run the remortgage at the same time is that the timescales becomes quite critical.  Just to reiterate, the valuation carried out on behalf of yourself for your Help To Buy Redemption is valid for 12 weeks from the time the Surveyor visits your property.  With this in mind, your remortgage process may well take in excess of 12 weeks, at which time you may find that you either have to consider a desk top from the original surveyor or reinstruct a new valuation.

 

In summary therefore, you may find the best way to proceed is as follows:-

  1. It is important to confirm whether you can remortgage and on this basis it would be prudent to take advice from and Independent Financial Adviser or certainly speak to your existing Lender prior to commencing any process.
  2. Make sure you are aware of the valuation process, who it is that you will need to instruct and the timescales involved in the redemption process.
  3. On the basis that a remortgage is possible instruct your RICS surveyor to carry out the Valuation on your behalf based upon the criteria required by the HCA for the Valuation Report itself. (Request a Valuation)
  4. Submit the Valuation Report which should be fully completed and signed accordingly, this needs to be sent to Target.HCA@targetgroup.com with the address provided in the subject heading.
  5. The Valuation Report needs to be submitted within 5 days of you receiving the Valuation Report.
  6. Continue the process of remortgage with your Lender and ascertain whether you have an acceptable loan to value based upon either the Lender HPI Valuation or any subsequent Valuation carried out by the Lender’s valuing Surveyor.
  7. Make sure the solicitor or legal adviser you instruct, or instructed by the Lender is fully aware of the process of Redemption.
  8. Make sure you are fully aware, as is the solicitor and Lender, of the timescales involved particularly with regard to the lifespan of the Help To Buy Valuation. (If we are ever asked to provide desk tops or revaluations it is usually because the remortgage process has taken too long to conclude).
  9. It is likely that you will receive a redemption figure within 2-4 weeks of making the application and submitting the Help To Buy Valuation Report.
  10. You will then have 4-6 weeks to settle the redemption before the Valuation expires.
  11. If you get to 10 weeks and the redemption has still not been settled, then make contact with your surveyor to prepare for a desktop valuation – which will extend the valuation for a further three months – or arrange for a new valuation to be carried out.

 

Please note that this information is provided as guidance only and is only provided on the basis of experiences we have had with previous clients, every case differs and it may well be that there is a more suitable process for you to follow.