What is a Help to Buy Valuation?
A Help to Buy Valuation is used to determine the amount repayable on a Help to Buy Equity Loan in proportion to the current market value of the home.
The valuation consists of a physical inspection of the home and local market research. This is to determine the value of the property and is completed by a RICS-registered valuer. A Help to Buy Valuation is necessary when you want to sell, remortgage or if you decide to buy more of a share of your Help to Buy home.
Below we look at when and why you would need a Help to Buy Valuation. We also look at the cost of hiring a property valuation surveyor and for 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?
Help to Buy (HTB) is the name of a range of government schemes designed to help first-time buyers achieve home ownership. These include the Help to Buy ISA, Shared Ownership and the Help to Buy: Equity Loan Scheme. The Help to Buy: Equity Loan Scheme in England ends on March 31st 2023.
It is the Help to Buy Equity Loan which would require you to get Help to Buy Valuation. Via the equity loan, the government offered a contribution to the purchase of a new build home. As a result, they would own a percentage of your property.
The government provided buyers with an equity loan of up to 20% of the value of a property. The buyer would then need at least 5% deposit.
This allowed individuals to buy newly built homes with less of a deposit and a smaller mortgage. Additionally, no interest is charged for the first five years.
Be aware that you can no longer apply for a Help to Buy: Equity Loan in England. The advice below is for those who either have an existing Help to Buy loan on their property or are buying in Wales. The scheme in Wales has been extended to March 2025.
What Happens During a Valuation?
When the surveyor visits the home, they will consider 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
- Condition of the home
- Leasehold or freehold
- Planning permissions
- Additional property features such as improvements and extensions
They will also conduct market research, reviewing recently sold properties in the area. This allows them to determine the property's current market value.
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.
A valuation is not a detailed look at the home and should not be confused with a property survey.
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When Do I Need a Help to Buy Valuation?
You will need a Help to Buy Valuation when you sell your home, are remortgaging your HTB property or repaying the loan. This can be done in full or by buying more shares of the home (known as "staircasing").
Target HCA, appointed by the Homes and Communities Agency to administer the Help to Buy Equity Loan scheme, require a valuation from a RICS-registered valuer.
1. If You’re Selling
You will need a Help to Buy Valuation when you decide to sell your property. At this point, the government loan 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 a RICS valuation or the sale price, depending on which is the highest.
2. If You're Staricasing
Staircasing is the process which allows you to buy shares of your HTB home from the government.
After being in the home for a certain amount of time, 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%. The amount of time you must have lived in the home before buying more shares will be set out in the terms of your lease.
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.
3. If You're Paying Off the Equity Loan in Full
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.
4. If You're Remortgaging
You will also need a Help to Buy valuation when remortgaging the home. Target HCA needs to know the market value of your home so they can check the Loan to Value ratio (LTV). This shows them that you can afford the new repayments.
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What Requirements Must the Valuer Meet?
To meet the requirements of Target HCA, the valuer who conducts the valuation on your HTB home must:
- Be qualified and RICS registered
- Be independent and not connected to any estate agent
- Not be known to you or related to you
- Consider at least 3 comparable properties and their sale prices
Additionally, the report must:
- Be on company-headed paper
- Signed by the RICS surveyor
- Addressed to and supplied to Target
- Assess the interior of the property
- Include the inspection date
- Not be carried out for a bank or mortgage purposes
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.
Finding a RICS Registered Valuer
There are a few ways you can find a Valuer for your HTB 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.
