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Selling a house with a Help to Buy Equity Loan

Property Saviour » First Time Buyers » Selling a house with a Help to Buy Equity Loan

Selling a home can be a stressful experience. From arranging house viewings, sorting out solicitors’ fees, and finding a new property, there’s a lot to think about. And if you’ve taken out a Help To Buy equity loan, it can add another layer of complexity.

This blog post will take a look at what a Help To Buy equity loan is, how it affects homeowners, and what it means for those selling a home with a Help To Buy loan.

Table of Contents

What Is A Help To Buy Loan?

Help To Buy equity loan is a great way for first-time buyers to purchase a new-build property up to the value of £600,000. Buyers can get a loan of up to 20% of the property’s value and then only need to put down a 5% deposit and take out a mortgage for the remaining 75%.

However, there are some restrictions such as you have to be a first-time buyer and price caps are depending on the region.

The loan amount is not fixed and changes in line with the market value of the home. If the value of the property increases, then the loan repayments will be more than the original loan.

Conversely, if the value of the property decreases, then you owe less than what you initially borrowed.

Help To Buy Equity Loan Price Caps

According to Zoopla, there is help to buy equity loan price caps for various UK regions. These caps vary from region to region and provide an important aid option for those looking to buy a home.

It can be a complex process, so understanding the price caps for each region is crucial for making an informed decision on a purchase.

Region

Price

East

$407,400

East Midlands

£261,900

London

£600,000

North East

£186,100

North West

£224,400

South East

£437,000

South West

£349,000

West Midlands

£255,600

Yorkshire and Humber

£228,100

Do I Have To Pay Back My Help To Buy Equity Loan Before I Sell?

If you take out a Help To Buy equity loan, you should repay it within 25 years or when you choose to sell your home.

When you purchase a property with this loan, a second charge is added to your property title at the Land Registry. This means that you won’t be able to sell your house until the Homes and Committees Agency (HCA) has their loan percentage repaid.

Until then, you will have to repay the HCA’s equity loan when you sell. Staircasing is an option, which lets you make multiple payments to repay the loan in full.

Selling A House With A Help To Buy Equity Loan
If the value of the property increases, then the loan repayments will be more than the original loan.

Remortgaging to pay off your equity loan

Consider remortgaging to pay off your equity loan if you can manage the repayments. Ensure you are no longer tied to your mortgage term, as this may incur early redemption penalties.

Wait until the term has expired. Make sure you can afford the monthly repayments. Alternatively, extend the mortgage term to reduce the payments, if preferable.

How Much Equity Do I Have In My House?

The amount of equity you have in your house depends on its value. Just like property prices can go up, they can also go down.

If this happens to your Help To Buy property, you will only need to repay the percentage of the loan based on the current market value of your home when you sell it.

For example, if you bought your home for £200,000 and took out a 20% Help To Buy equity loan of £40,000, but then it is only valued at £180,000, you will need to pay back 20% of that, which is £36,000 instead of the £200,000 that you initially borrowed.

Can You Sell A Help To Buy Home Before Five Years?

If you want to sell your Help to Buy house, you can do it before or after the five year period, but you must repay the equity loan. The property is in your name so you are free to sell it whenever you choose.

What if my Help to Buy home has fallen in value
When you decide to put your Help to Buy house for sale is up to you. You own the Help to Buy house, so you can legally sell it whenever you want.

What if my Help to Buy home has fallen in value?

Sometimes Help to Buy properties can go down in value. If that happens, you only need to repay the percentage of the loan at your home’s current market value when you sell it.

So, say you bought your home for £200,000 and took out a Help to Buy loan of 20% to buy it at £40,000. If your home is now worth £180,000, you’d need to repay 20% of that £180,000, so £36,000. That’s as long as your market valuation is approved by Homes England.

When Can I Put My Help To Buy House For Sale?

When you decide to put your Help to Buy house for sale is up to you. You own the Help to Buy house, so you can legally sell it whenever you want.

However, it is best to wait until you have built some equity in your home through making mortgage payments and the rising property value.

Additionally, it can be a good idea to wait until you have made all your equity loan repayments before starting the selling process, though this is not a requirement.

Is It Harder To Sell A Help To Buy Property?

Selling a Help To Buy equity loan property may be more challenging than one which isn’t. Once you have repaid your equity loan, the sale process is the same as any other. It is best to pay the loan off within five years while interest is still free.

If the loan hasn’t been settled, the sale is more complex. When advertising your property, you must notify Target – the HCA agency that deals with Help To Buy administration.

You also need to get the property valued by a chartered surveyor registered with the Royal Institute of Chartered Surveyors (RICS).

After the evaluation is done, the results, your offer and the required paperwork are sent to Target, plus a £200 admin fee.

Time is of the essence in a Help To Buy property sale when the equity loan hasn’t been paid off, as the valuation is only valid for three months. If the loan isn’t settled in that time, you will have to either pay for a new valuation or apply for an extension.

What if my Help to Buy property has dangerous cladding
The UK's biggest housebuilders have signed a commitment to remove unsafe cladding and fix other fire issues in mid-rise buildings.

What if my Help to Buy property has dangerous cladding?

Properties with dangerous cladding have seen their value drop significantly in recent years. Buyers for your home will not be able to secure a mortgage until the cladding is removed.

Homes England has advised that leaseholders living in such blocks can only sell at the price as if the cladding issue does not exist and has rejected any sale that is considered to be below market value.

Furthermore, those who can pay back the loan themselves have been banned from doing so as Homes England is not ready to sell at the reduced value.

The UK’s biggest housebuilders have signed a commitment to remove unsafe cladding and fix other fire issues in mid-rise buildings. The government is paying for the cladding to be replaced on blocks of flats that are over 18m high.

Has the Help to Buy scheme been successful?

More than 340,000 households made use of Help to Buy to purchase their home, many of them intending to become homeowners for the first time.

In 2021, the government implemented restrictions, limiting the scheme to first-time buyers only. Help to Buy has been a great help to many people who would otherwise have struggled to acquire their first home.

Developing a good repayment plan for the equity loan will benefit buyers as their property’s value increases and their equity grows as they pay off their mortgage.

It is important to have a well-structured repayment plan in place for the equity loan.

Selling House With Help To Buy Loan

When looking to sell a property that was bought with a Help to Buy equity loan, there are three main routes to go down.

You can hire an estate agent, go to auction, or sell to a cash buyer. Each of these has its own merits and disadvantages, so it’s important to consider your options to decide which one is best for you.

  • Estate Agent: This is the most popular route when selling a property. An estate agent will do all of the hard work, like creating a listing and advertising it, for a commission. The benefit here is that the estate agent does the work for you, but it can take months to find a buyer. 
  • Auction: This is becoming increasingly popular for selling Help to Buy properties with unpaid equity loans, as speed is important. You list your property at a housing auction, agree on a minimum reserve price, and if that price is met, it is sold.
  • Cash Buyer: Selling to a cash buyer is a great option for people who need to sell their Help to Buy equity loan property quickly. Cash buyers have plenty of experience with all kinds of properties, so selling a property with an unpaid equity loan is just another day in the office. 

Once you have accepted the offer, the amount will be in your bank in full. Here at Property Saviour, we are a cash buyer of houses, rated excellent on Trustpilot, and cover all fees.

Selling a house with a Help to Buy Equity Loan
We'd be pleased to provide you with advice on the process and offer you a free market appraisal of your property to assist you in making your decision.

How can we help?

So, if you want to put the stress of selling a Help to Buy home with an unpaid equity loan behind you, give us a call or fill in our online form for a free, no-obligation cash offer.

We’d be pleased to provide you with advice on the process and offer you a free market appraisal of your property to assist you in making your decision.

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  • The price we’ll offer is the price that you will receive with no hidden deductions.
  • Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
  • These valuations or surveys result in delays and price reductions later on.
  • We are cash buyers.  There are no surveys.
  • We always provide proof of funds with every formal offer issued.
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  • No long exclusivity agreement to sign because we are the buyers.
  • You are welcome to use your own solicitor. 
  • If you don’t have one, we can ask our solicitors for recommendations.
  • We share our solicitor’s details and issue a Memorandum of Sale. 
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