The Government backed Help to Buy equity loan scheme helped thousands of potential homeowners to purchase a new build property. The scheme started in 2013 and is due to end in England at the end of March 2023 (the scheme has been extended in Wales until 31/03/2025). The Help to Buy equity loan provided an interest-free loan (for the first 5 years) of up to 20% (or 40% in London) of the property’s value, which was added to the buyer’s deposit. This meant that buyers only needed to provide a 5% deposit to enable them to secure a mortgage for the balance of the purchase price. The loan is then repayable after 25 years or when the property is sold. As is often the case in life, changes in circumstance occur and you might find that you want to sell your Help to Buy home, so what happens when it comes time to selling a home with a Help to Buy equity loan? What fees will you need to pay and who do you notify? And what happens if you want to remove a name from the loan? In this article we aim to answer all of these questions.
Selling A Home with a Help to Buy Equity Loan
When you sell a home with a Help to Buy equity loan, the loan must be repaid. The amount that is repaid will be the same percentage you borrowed, e.g. if you received a 20% Help to Buy equity loan then you will need to repay 20% of the market value of the property at the point of sale. If the value of your home has increased then the amount to be repaid will also increase.
Get a Property Valuation
The first step in selling a property with a Help to Buy Equity Loan is to obtain a property valuation from a qualified RICS surveyor. This valuation will help determine the current market value of the property, which will be used to calculate the amount owed on the Help to Buy Equity Loan. To satisfy the loan administrator, you will need to use a surveyor who is a qualified and registered with the Royal Institution of Chartered Surveyors (RICS). Please note, the market value of the property is used to work out how much needs to be repaid, if you accept an offer that is lower than the market value, you will still need to pay the percentage based on the higher market value.
Contact the Help to Buy Agent
After obtaining the property valuation, you must send this to the loan administrator within 5 days of the date of the survey. A pdf on headed paper can be emailed to target.hca@targetgroup.com or you can post it to Target HCA, PO Box 911, Newport NP20 9PA. The loan administrator will then provide a statement outlining the outstanding amount on the loan and the options available for repayment.
Instruct a Conveyancing Solicitor
The Government’s website maintains that you must instruct a conveyancing solicitor to handle the various legal aspects of the sale.
Pay the Administration Fee
There is an administration fee of £200 that is payable, you will also need to clear any arrears of your monthly interest payments, if applicable. You will then need to complete the Help to Buy repayment application form which can be download here. The loan administrator will send you and your solicitor a redemption (repayment) letter and will send your solicitor a legal undertaking agreement.
The loan administrator will send an ‘Authority to Complete’ form within 5 days of receiving the legal undertaking from your conveyancer, this means you can now complete the sale of your property.
Repaying the Help to Buy Equity Loan
The Help to Buy Equity Loan must be repaid in full when the property is sold. If you choose to repay the loan in full at the point of sale, the funds from the sale will be used to pay off the loan.
Whilst the sale of your home is progressing it is important that you carry on paying the Help to Buy monthly interest fees and/or administration fee.
Removing a name from a Help to Buy Equity Loan
Sometimes things don’t work out quite as we planned and it is not uncommon for joint owners to part ways. In this instance, it is possible to add, remove or replace a name on a Help to Buy equity loan.
If you are adding a name, the person must also meet the Help to Buy eligibility criteria.
If you need to remove a name, one of the original owners must stay the same and that person must be named on the repayment mortgage. They will also need to pass an affordability check. If the length of the repayment mortgage changes then the term of the equity loan must also change to match it.
To replace a name on the equity loan contract, you’ll need to add a homeowner and remove a homeowner in the same application.
In all instances there is an administration fee of £115 to pay, you will need to instruct a conveyancing solicitor and any arrears must be cleared before the application can be processed. There is more information on how to change the name on a Help to Buy equity loan available here on the Governments website.
Selling a property with a Help to Buy equity loan can be a complex process, but it is manageable with careful planning and consideration. It is important to obtain a property valuation, contact the Help to Buy loan administrator, and decide on the repayment option that works best for your circumstances. The information contained in this article should not be relied upon in place of professional advice, if you are unclear about how best to proceed, it is prudent to seek impartial financial and legal advice.
