Can you sell a property subject to a Help to Buy loan?
Selling a property that’s subject to a Help to Buy loan is a little more complicated than a regular sale. In addition to going through the process of putting your property on the market, you’ll need to repay the equity loan you used to purchase the Help to Buy property.
What was the Help to Buy scheme?
The Help to Buy loan was a government scheme which allowed new buyers to borrow up to 20% of the value of their first home (40% in London). Buyers had to contribute a deposit of 5% of the property value, and could then take out a traditional mortgage for the remaining 75% (55% in London). The amount buyers could borrow varied across the country and was highest in London, where home buyers could borrow up to a maximum of Ł600,000 (in the East Midlands, for example, the rate was a lot lower, at a maximum of Ł261,900). The scheme was only available on new builds.
The Help to Buy equity loan was provided by the Homes and Community Agency (HCA) and this is the body that must be repaid before you sell your Help to Buy property.
The Help to Buy scheme was time limited and will come to an end on March 31st 2023, as reported by Gov.uk, having closed to new applicants on 31st October 2022.
The Help to Buy loan is interest free for the first five years so, if you can, repaying during this time will save you a considerable sum. It’s also important to remember that Help to Buy is an equity loan, which means that the amount you owe is tied to the value of your home. If your home value increases, the amount you’ll have to pay back will increase too, and vice versa.
Selling a House Bought with a Help to Buy Loan
If you have made a full Help to buy equity loan repayment, then selling your house will be just the same as selling any other property. However, if you have a balance outstanding, the process is slightly more complex. If you have any questions about making the help to buy equity loan repayment, a specialist property law firm can help you to navigate through the process.
Before you can sell a house bought with a Help to Buy loan, you’ll need to contact the HCA. This can be done via their agency, Target, which manages their administration and they will be able to tell you how much you need to pay back. This will be based on a current valuation completed by a chartered surveyor (which you will have to pay for). This survey is only valid for three months so it needs to be completed once you’ve had an offer accepted or are close to selling your property. You’ll then need to either pay back the loan in full or set up a payment plan with Target, including any interest and fees.