Can I Sell My Help to Buy Home?
Estimated reading time 6 minutes
The Help to Buy Scheme has helped many people get onto the property ladder. Where in the past a home was not affordable, the scheme helped make that lifetime goal of becoming a homeowner much more possible. Of course, there comes a time when the property may need to be sold. With Help to Buy property though, things aren’t quite as simple as selling a home you obtained via the more traditional routes. There is the goverment loan to pay back, and with it being an equity loan, the amount being paid back can be more, or even less than you borrowed. So, whilst it is possible to sell your Help to Buy home, there are some considerations you need to take.
What is a Help to Buy home?
The Help to Buy scheme was a government initiative aimed at helping people secure their first property. Now closed to new applicants, the scheme was introduced in 2013 and worked by lending applicable homebuyers a loan of up to 20% (40% in London) of the property value. They could then pay just a 5% deposit and secure a mortgage for the outstanding 75%/, or up to 55% if in London. With interest-free periods of five years and twenty-five years in which to pay it back, it proved to be an attractive option for many.
Available to first-time buyers and only for new-build properties, maximum property values were set regionally. Property in London for example could be purchased using the scheme up to the value of £600,000, whilst in the North East, a home up to the value of £186,100 could be bought. In some areas, the prices were capped at 1.5 times the value of the average first-time buyer property in the region.
How do I sell a Help to Buy home?
You can sell your Help to Buy property in much the same way you could sell any other property. It all depends on the status of the equity loan you have used. If it has been paid off in full, you can sell just like you would sell any other home. If you still have some of the loan outstanding, things can get a little more complicated. You can still sell on the open market but there will be a few more hoops for you to jump through to get the sale completed.
You should accept an offer on your home like normal, but you will need to contact an organisation called Target. They manage the administration and payments for Help to Buy properties on behalf of the HCA (Homes and Communities Association). Once you have informed Target of the offer you have accepted, you should also have a valuation carried out by a RICS surveyor.
With a valuation from a surveyor alongside the accepted offer sent to Target, things can start to move forward. However, the valuation has a three-month expiration on it. It is within this time that the payment to clear the loan should be made. If it isn’t, you will need to see if an extension can be granted or pay for a new valuation from a member of RICS.
The amount you will owe will be calculated as a percentage of the selling price or current market value; whichever one is the highest. Any payments already made towards the loan will be deducted from this repayment amount to give you a final total.
You can then continue the sales process as normal and look forward to your next home.
It should be noted that the admin fees charged for the HCA are approximately £200 and should additional valuations be needed at the expiration of the three months, you will need to pay again.
When can I sell a Help to Buy home?
You can put your Help to Buy home up for sale at any time. You will just need to follow the process we mentioned above to ensure the loan is paid off as and when you sell.
How much will I pay when I sell a Help to Buy home?
The amount you must pay back when selling your Help to Buy home varies depending on the value of the property when you sell it. If the home has increased in value you will need to pay back more than you borrowed. If your home has depreciated, you’ll pay back less than you borrowed.
The home you purchased cost: £400,000
You paid a 5% deposit: £20,000
Help to Buy loan of 20%: £80,000
Your mortgage of 75% covers the rest: £300,000
The value of your home has risen by 20% and sits at £480,000. As a result, the value of the Help to Buy loan is now £96,000.
Alternatively, your home has now fallen to a value of £350,000, Your Help to Buy loan is now only worth £70,000 rather than the £80,000 at the time of purchase.
How and when do I pay back my Help to Buy loan?
You can pay back your loan in a few ways and at any time. You can either make contributions when you live in the property, pay it back upon the sale of the home, or remortgage your home to clear the loan before you sell.
The loan is interest-free for the first five years, so it is advised to pay back as much as you can in these early stages. However, it is not quite as simple as that.
You cannot just make small payments here and there to chip away at it. Instead, payments must be made in increments of 10% of the property’s current value. Therefore, if your Help to Buy loan was for 20%, you could pay two 10% instalments, or one 20% payment to clear the debt.
If you had borrowed 15% for the Help to Buy scheme, due to the 10% rule, you could only make the full payment.
Should you plan to pay it back after the interest-free five years, it should be noted that the interest for the remaining twenty years of the loan will accrue fast, and it can prove to be very costly.
Each time you want to make a payment though, you will need the valuation from a member of RICS which incurs the fee we referred to earlier.
To make a payment on your Help to Buy loan, you can call 0300 123 4123.
If you own a Help to Buy property and need a quick sale, speak to our team at Gaffsy. We are the cash house buyers who expedite your house sale, ensuring you can complete the process in as little as seven days. Our sell house fast process is built around you, allowing the sale of your home to be as fast as you need it to be. We make it easy to sell a house without an estate agent, and keep things free from stress, free from worry, and free from cost. Our fast sales process comes with no fees, no hidden charges, and no surprises. Just one fast route to sale, and as we buy any home, everyone can benefit.