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Selling a Property With a Help to Buy Equity Loan

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12th May 2020 (Last updated on 15th May 2020) 8 minute read

Although the Help to Buy Equity Loan is a helpful way to get onto the property ladder, homeowners who have used it are not always aware of the implications it has when it comes to selling their property.  

There is a variety of Help to Buy schemes that can aid you in the buying process, with the Help to Buy Equity Loan being one. It has helped thousands of buyers get onto the property ladder but it’s also important to consider how it will affect your next steps. If you’ve already used this scheme to secure a property, it’s important to research what to do next before committing to selling your home. 

With the help of our professional property experts, Compare My Move has created a range of insightful selling articles to guide you through the process. In this article, we will discuss the process of selling a home you’ve purchased using a Help to Buy Equity loan and how it may differ from traditional selling.

This article will cover the following:
  1. An Overview of the Help to Buy Equity Loan
  2. How Do You Sell Your Help to Buy Property?
  3. Can You Sell Your Home Before Paying Back the Loan?
  4. Who Do You Contact When Selling?
  5. Other Costs Involved in Selling A Help to Buy Equity Loan Property
  6. What Happens if Your Home Has Fallen in Value?
  7. Can You Move Your Help to Buy Mortgage?
  8. Can You Use the Help to Buy Equity Loan Again?
  9. Saving Time and Money During the Selling Process

An Overview of the Help to Buy Equity Loan

The Help to Buy Equity Loan is a government scheme available to first-time buyers and all homeowners looking to move in the UK. To be eligible for the scheme, the property you’re purchasing must be newly built and valued up to £600,000. 

This scheme can greatly help first-time buyers and homeowners, aiding them in purchasing a new-build home with the help of the Homes and Communities Agency (HCA) via an equity loan. This loan means the government will lend you up to 20% of the cost of your new-build home where you will then have to provide a 5% cash deposit and a 75% mortgage to cover the remaining costs. In London, the government can lend up to 40%. 

It should be noted that in the Budget 2018, it was announced that the Help to Buy scheme will come to an end in March 2023. A new version of the scheme will be introduced in 2021 to ensure it is better targeted to those who most need support when purchasing a home. Some of the key changes include:

  • The scheme will only be made available to first-time buyers. 
  • The scheme will introduce regional property price caps based on local markets. This will then set the maximum price of a new-build that can be bought with Help to Buy in each region. 

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How Do You Sell Your Help to Buy Property?

You can sell your property at any time. However, when you do, you will have to repay the equity loan and mortgage on the completion of the sale. If you have chosen to repay the loan sooner, then you can continue to sell without further repayments. 

This means that if you bought the property with a 5% deposit and 75% mortgage, you will have to repay 20% of the value of the property at the time of the sale. You must appoint an independent valuer to assess the property and determine its worth. The Homes England’s Mortgage Administrator will be the one to collect the repayment. 

You should sell the property on the open market at the price agreed by the valuer as the property will not be released for any price less than the market valuation. If you sell the property for more than market value, then the amount due under the equity loan will be the percentage value of the sale price. 

 If you have any outstanding fees or interest, you must pay these before completing the sale. Again, the loan must be paid off before you complete the sale. 

You will also need to complete the sale before being able to secure another Help to Buy Equity Loan if they are still available at this time. 

If you’re unsure of any steps within the process, you should speak to your conveyancer who can provide further advice. 

Can You Sell Your Home Before Paying Back the Loan?

The equity loan must be repaid after 25 years. However, if you’re selling the property that was purchased using the scheme before this deadline, then you must repay the loan at the time of selling. 

When buying a property with Help to Buy, a second charge will be placed on the title at Land Registry, ensuring you can’t sell without repaying the loan percentage. 

You can repay the loan in full through a process called ‘staircasing’ where you will have to repay through multiple payments. If this doesn’t occur, you will have to repay the equity loan when selling your property. 

Who Do You Contact When Selling?

If you’ve purchased a home with the Help to Buy Equity Loan, you will need to contact Target at My First Home for any further enquiries. You can either call them via 0345 848 0235, or you can email them using the following address: Target.HCA@targetgroup.com

Target is the firm used for all administrative duties regarding Help to Buy. They will be able to answer any questions you may have and advise you on what your next steps should be. 

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Other Costs Involved in Selling A Help to Buy Equity Loan Property

If you’re selling your Help to Buy property without having first repaid your loan, then this will be deducted in full once the sale is complete. If you’ve previously made any redemption payments, then these will not be counted in the deduction. 

The loan will be calculated as an agreed percentage of either the total sum of the sale price or the current market value, whichever is highest. This will have to be obtained through a valuation, meaning you will be responsible for contacting a RICS qualified surveyor. If done incorrectly, the valuation could be rejected by your Help to Buy agent and you will have to pay for a second valuation also. 

Your Help to Buy agent will calculate a total repayment amount once the valuation has been accepted. It’s important to know that there will likely be an administration fee included in this price, typically around £200. 

Don't’ forget to add the average cost of selling a house to these extra expenses for a more accurate price. 

What Happens if Your Home Has Fallen in Value?

As new-build homes are only considered as ‘new’ for a short period of time, their value can lower over time. When using a Help to Buy Equity Loan, you only need to repay the percentage of the loan at the market value when you sell. 

This means that when you sell and the market value of the property is lower than the original price, you are not liable for any shortfall in the loan. You must appoint an independent valuer to assess the property and the current value for this new value to be approved. 

If you have fulfilled all the terms set out by your lender, have an approved market value and do not have outstanding interest or management fees, you can continue with the sale and can pay less than the original amount owed if the value has indeed decreased. However, the Mortgage Administrator must approve the sale before this is certain. 

The final repayment price will be calculated by deducting your outstanding mortgage from the market value or sale price, whichever is highest. 

If you have not complied with the terms of the Help to Buy mortgage deed, you may be expected to repay the full equity loan. 

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Can You Move Your Help to Buy Mortgage?

When you buy a Help to Buy home, you will likely have a mortgage deal specifically tailored to Help to Buy properties. If you’re selling your Help to Buy home to purchase a non-Help to Buy property, you will likely have to remortgage the new home

Some Help to Buy mortgages may be portable, but many are not. This means you will have to apply for a new mortgage deal rather than port the original rate from your old home. 

Speak to your mortgage lender before committing to a new deal as some lenders will refund any early repayment charges, depending on their personal requirements. 

Can You Use the Help to Buy Equity Loan Again?

You can currently use a Help to Buy Equity Loan twice as long as you follow the criteria for eligibility. As long as your previous equity loan has been settled, it is possible to apply for the scheme again.  

However, in April 2021, the scheme will only be available to first-time buyers. This means that once you’ve used a Help to Buy Equity Loan to purchase your first home, you will no longer be eligible to apply, meaning you can not use it for a second time. 

Saving Time and Money During the Selling Process

No matter what your circumstances, it’s still important to think ahead and get organised when selling your home. Planning in advance can help you save time and money when you need it the most. The process of selling a property can be a long one and so make sure you have the right professionals around to successfully guide you through. 

Whether you’re comparing conveyancing quotes, surveying quotes or removal companies, Compare My Move can connect you with trusted and verified professionals in your local area. 

Zenyx Griffiths

Before Compare My Move, Zenyx once wrote lifestyle and entertainment articles for the online magazine, Society19 as well as news articles for Ffotogallery.