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If you bought your home with the aid of the Help to Buy Equity Loan scheme, you’re likely aware that it comes with specific rules, especially when it’s time to sell. The government-backed scheme, which ended in March 2023, helped many first-time buyers purchase their homes with just a 5% deposit. However, the repayment of the equity loan can make the selling process slightly more complicated. In this guide, we’ll cover everything you need to know about selling a property with a Help to Buy Equity Loan, what to consider now that the scheme has ended and the steps you’ll need to follow.
What Was the Help to Buy Equity Loan?
The Help to Buy Equity Loan was a scheme designed to help buyers purchase a new-build home. With a loan from the government covering up to 20% (40% in London) of the property’s value, buyers only needed a 5% deposit and a mortgage for the rest. The loan was interest-free for the first five years, making it an attractive option for many.
While the scheme ended in March 2023, properties purchased under this initiative still have the equity loan attached. This means homeowners need to repay the loan, either when they sell the property or at the end of their mortgage term, whichever comes first.
Selling a Home with a Help to Buy Equity Loan: What to Expect
When you sell a property with a Help to Buy Equity Loan, the outstanding loan must be repaid. The amount you repay will be based on the market value of your property at the time of sale, not the original purchase price. This means if your home has increased in value, the amount you owe will also increase.
For instance, if you bought your home for £200,000 and took a 20% Help to Buy loan (£40,000), and you sell the home for £250,000, you would need to repay 20% of the new value—£50,000.
The Process of Selling a Home with a Help to Buy Equity Loan
- Get a RICS-Registered Valuation
Before selling your home, the government requires you to get an independent valuation from a RICS-registered surveyor (Royal Institution of Chartered Surveyors). This valuation will determine how much of the loan you need to repay. It’s important to note that estate agent valuations won’t be accepted.
A RICS valuation ensures that the government receives the correct percentage of your property’s value. You’ll need to arrange this valuation yourself and it must be no older than three months when you complete the sale.
- Instruct a Solicitor
As with any property sale, you’ll need to instruct a solicitor. However, when selling a home with a Help to Buy Equity Loan, your solicitor will also need to work with Target HCA, the body that administers the Help to Buy scheme. Your solicitor will notify Target HCA of your intent to sell and manage the repayment of your loan. - Repaying the Equity Loan
Once the sale goes through, the equity loan is repaid directly from the sale proceeds. If the sale price covers the outstanding mortgage and equity loan, this is relatively straightforward. However, if the sale price doesn’t cover the full amount, you’ll need to make up the difference from your own funds.
You can also choose to repay the equity loan before selling by remortgaging or using savings, but this requires the same valuation process.
- Consider Administration Fees
There are fees associated with selling a home that has a Help to Buy loan. You’ll need to pay for the RICS valuation and your solicitor’s fees. Additionally, there’s a £200 administration fee payable to Target HCA for processing the repayment.
Help To Buy Scheme Considerations
Although the Help to Buy scheme has ended, homeowners who bought their properties with an equity loan still need to consider its implications.
Interest Payments After Five Years
If you’ve had your Help to Buy loan for more than five years, you’re likely paying interest on it. Although this interest doesn’t reduce the loan balance, it can add up over time. This is something to bear in mind when planning your sale, as it may be beneficial to repay the loan sooner to avoid accumulating further interest.
Market Fluctuations
The amount you repay will be based on the value of your home at the time of sale. This means that if your home has increased in value since you purchased it, you’ll be repaying a higher amount. However, if your property’s value has decreased, you’ll repay less than the original loan amount. Understanding how the current market impacts your repayment can help you plan your finances effectively.
The Selling Timeline and Key Requirements
Selling a property with a Help to Buy loan typically follows the same timeline as a regular sale, though there are a few additional steps to account for:
- Valuation (1-2 weeks) – Arrange for the RICS valuation.
- Solicitor Instructions (2-3 weeks) – Notify your solicitor and inform Target HCA of your sale.
- Repayment of the Loan – Once the sale is complete, the equity loan is repaid from the proceeds.
Throughout the process, staying in contact with your solicitor and Target HCA is crucial to ensure smooth communication and avoid delays.
How Lovelle Can Help
Selling a home with a Help to Buy Equity Loan can feel overwhelming, but with the right knowledge and guidance, it’s a manageable process. At Lovelle, we understand the complexities involved and can support you every step of the way. Our experienced agents can help you navigate the housing market and ensure that the selling process is as seamless as possible.
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