Help to Buy Valuation Explained
Help to Buy schemes were designed to provide financial help for first-time buyers. The scheme helps them get on the property ladder with a new-build property.
A Help to Buy Valuation is necessary when you want to sell or if you decide to purchase more of a share of the home.
Below we look at when and why you need a Help to Buy Valuation. We also look at the cost of hiring a property valuation surveyor and how long the valuation is valid. This can prepare you for either selling or buying more of a share in your Help to Buy property.
What is Help to Buy?
Via the Help to Buy equity loan, the government offered a contribution to the initial purchase of a new build home. As a result, they own a percentage of your property. This allowed individuals to buy homes with less of a deposit and a smaller mortgage.
The government would provide an equity loan for up to 20% of the value of the property and the buyer would need a minimum 5% deposit. The remaining amount to purchase the home would need to borrow from a mortgage lender.
Be aware that you can no longer apply for a Help to Buy: Equity Loan. The advice below is for those who have an existing Help to Buy loan on their property.
Help to Buy Redemption
After a set amount of time, the homeowner is able to buy the shares owned by the government over time. This is known as “staircasing”. The shares are sold to the homeowner at the current market value, hence the need for an independent valuation.
If you sell your property, you will have to pay off the loan in full. The amount that needs to be repaid depends on which is higher - the value of the property at the time (based on a valuation) or the agreed sale price.
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What is a RICS Help to Buy Valuation?
A RICS Help to Buy Valuation is a valuation of the home conducted by a Royal Institute of Chartered Surveyors registered surveyor.
This will involve market research and a visit to the home for an inspection. This is by no means a detailed look at the home and should not be confused with a property survey.
The surveyor will value the home based on the following:
- Type of property (including size and age)
- How it was built and the materials it is made from
- Number of bedrooms
- Location and local government zoning
- Market analysis - reviewing recently sold properties in the area
- Condition of the home
- Leasehold or freehold
- Planning permissions
- Additional property features such as improvements and extensions
The report is likely to be sent as an email, although you may be able to request that it is sent as a printed letter. The report will be basic with a simple layout, clearly stating the estimated value.
When Do I Need a Help to Buy Valuation?
When you decide to buy some or all of the government share of the home, you will need a Valuation Report. You will also need a valuation if you want to sell the home.
If You’re Selling
You will need a Help to Buy Valuation when you decide to sell the home. At this point, the loan from the government will need to be repaid. The amount is based on the market value of your property and the loan percentage amount at the time you sell.
For example, if your equity loan was 20%, when you sell the property, you will repay 20% of the sale fee. The market value of your property is set by either a RICS valuation or the sale price, depending on which is highest.
Staricasing
Staircasing is the process which allows you to buy shares of your Help to Buy home from the government.
Once you have lived in the home for a certain amount of time, set out in the terms of your lease, you can choose to buy a bigger share of the property. This enables you to build the percentage share that you own in the property, up to owning it 100%.
Shares in the property owned by the government will be sold to you at the current housing market rate. This is why an impartial valuation is required as part of the process. This must be a Valuation Report from a RICS registered valuer. Estate agent valuations will not be accepted.
Paying Off a Help to Buy Equity Loan Without Selling
If you are looking to pay off the outstanding loan amount in full rather than “staircasing”, this will also be at the market price of the property at the time. As a result, a RICS valuer would need to complete a valuation report.
The valuation will determine how much you will pay the government to clear the equity loan.
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How Long are They Valid For?
The valuation is valid for 3 months from the date it is produced. According to the government website, it must be sent to government administrators within 5 working days of being issued.
How Much is a Help to Buy Valuation?
A Valuation Report from a RICS registered valuer costs on average around £320. This is based on the average house price of £277,000 in the UK.
The cost of your valuation will depend on a few factors. These include the type of property, location and the surveying firm you opt for.
Finding a RICS Registered Valuer
There are a few ways you can find a Property Valuer for your home. These include
- Recommendations from friends, family, and colleagues
- Looking on the RICS website
- Reading company reviews
- Using a comparison site like Compare My Move
We can match you with up to 6 local RICS registered surveyors who offer valuations among their services. These surveyors will not only have exceptional market knowledge, but they will also have local knowledge of the area of the home.
Our Sales and Partner Support Teams work hard to ensure we only take on the best in the business. All surveyors and valuers must be RICS registered before joining our network.
