How does a Help to Buy equity loan affect selling your home?
The Help To Buy scheme was a government initiative that was launched in 2013 to help first-time buyers to buy their first home. It was only applicable to those buying a new-build home and provided up to 20% of the value of the property as an interest free five year loan. This reduced the size of the mortgage that a first time buyer had to secure as well as allowing them to purchase the property with only a 5% deposit, making the process considerably more affordable.
Under the terms of the scheme, the buyer agreed to repay the loan through staircasing, after 25 years or at the point at which the property was sold.
Help To Buy Repayment
The buyer, when signing up to the scheme, agreed to repay the proportional value of the property at the point of sale. It is important to note that this value may be lower or higher than the value of the original loan, based on any changes that have occurred in the housing market or any improvements that the buyer had made to the property to increase its value.
This means that if the government provided a 20% loan on a property purchased for £200,000, its share at that point in time was worth £40,000. If the property value increased to £250,000 at point of sale, the amount to be repaid would be £50,000. Conversely, if the property had decreased in value to £180,000, the amount repayable would also decrease to £36,000.
The amount repayable would either be the sale price agreed for the property, or the current market value if this was higher. Under the terms of the Help To Buy scheme, an independent RICS-qualified surveyor would need to provide a valuation of the property to Target, who are the scheme administrators, and they would confirm the total amount repayable, which would include their administration fee of £200. The seller would also need to pay the surveyor’s fees.
Timescales
The valuation of the property by the surveyor is only valid for three months, so time is of the essence when selling a property which was originally purchased with a Help to Buy equity loan. Often, selecting an online conveyancer with experience in this area, such as those seen here: https://www.samconveyancing.co.uk/news/conveyancing/help-to-buy-loan-repayment-5182 can speed up the process to enable the sale to complete in a timely fashion.
Failing to complete within the 3 months would require a new valuation and for Target to recalculate and re-confirm the amount repayable. This would add to the costs as well as extending the timescales for selling the property.
Summary
Selling a home which was purchased with a Help to Buy equity loan involves a few more steps than a typical sale but provided that your conveyancing solicitor has experience in this area, it should not significantly increase costs or timescales. If you are thinking of selling your home, you can contact Target to notify them on 0345 848 0235.