The Help to Buy equity loan scheme ran from 2013 to 2022, enabling around 375,000 first time buyers to get onto the property ladder. It worked by giving eligible London buyers a loan equal to up to 40% of the home’s value. In London, only new properties, costing up to £600,000 were eligible. As Help to Buy equity loans have been around for a decade now, many people who took advantage of the scheme will have decided to move on. If you’re a Help to Buy homeowner in Balham, Tooting or Wandsworth, we answer some key questions about selling your property.
Help to Buy equity loans helped first-time buyers afford new-build properties by offering loans of between 5% and 40% of the property’s value, in London (20% elsewhere). The maximum London purchase price was £600,000. People who took advantage of the scheme paid a minimum 5% deposit. There was no interest to pay on the loan for the first five years.
You can sell your Help to Buy property but to do so you need to pay back the equity loan before you find a buyer, if you haven’t already done so.
You are free to sell the property at any time as long as you pay back the equity loan. Unless you need to sell for any reason, you may wish to wait until you are in a position to pay back the loan, and that the property has risen in value, so you have more equity in the home to put towards you next purchase.
Selling a Help to Buy property involves the same process as any other house sale, however, you will need to pay back the equity loan first.
To do this, your first step is to contact the body which administers Help to Buy called the Homes and Communities Agency (HCA). You will also need to have the property valued by a Royal Institution of Chartered Surveyors (RICS) registered surveyor.
Rather than paying back the amount of money you borrowed, you will need to pay back the same percentage of the property’s current value. So, if the property has risen in value, you will pay more, but if it has fallen in value – which can happen with new builds – you will pay less. If you have paid off some of the loan already, that will be deducted from the final repayment.
The costs involved with selling a Help to Buy property are the same as any other – so you’ll need to factor in estate agent and conveyancing fees and charges as well as the cost of preparing the home for sale and removal fees. You’ll also pay stamp duty on the home you’re buying.
If you haven’t yet paid back your Help to Buy equity loan, you will need to factor in this cost too. As we’ve said, you will pay back a percentage of the property’s current worth – not the value when you bought it. For example, if you bought your home for £400,000 and took out a Help to Buy loan of 40%, your loan would have been for £160,000. If your home is now worth £500,000, you’d still need to repay 40%, so £200,000.
You will need to pay for a RICS approved survey too. You should also factor in mortgage costs for the home you are buying. Most buyers took out a specific Help to Buy mortgage so you may need to move to a different loan which could mean higher interest rates and, potentially, early repayment fees. Talk to your lender or a mortgage broker to get the full picture.
Some new properties fall in value after they have sold. While this is unlikely given the rate at which house prices have risen over recent years, it is possible. Remember that if this happens, you only need to repay the percentage of the loan at your its current market value when you sell it.
If you are thinking of selling your Help to Buy property, contact us. We’d be happy to advise you about the process and offer you a no-obligation market appraisal of your property to help you weigh up your options.