Selling a Help to Buy Property: Complete Guide

There have been various schemes in place to help buyers get themselves on the property ladder. From the Help to Buy ISA to the First Home Scheme and more, those aiming to own property have had varying levels of assistance over the years. When it comes to selling a Help to Buy property, or a property obtained via these schemes, things are a little different to what you may be used to.

In this edition of our blog, we look at the Help to Buy scheme and how you can sell a home you obtained through it.

What is the Help to Buy scheme?

The Help to Buy scheme was a government initiative aimed at helping people purchase a home. Offered as an equity loan, it gave successful applicants up to 20% of the property value in the form of a loan. No interest would be charged during the first five years of borrowing, and only a 5% deposit would be needed. The remaining balance of the property value would then be covered by a mortgage.

This means that there would be two payments per month – one for the mortgage and one for the Help to Buy loan. Collectively, the total outgoings would typically be smaller than if you had a mortgage for the full property value.

The scheme is now closed, meaning people can no longer apply, but there are still thousands of homeowners currently living in a property bought via this scheme.

Can I sell my Help to Buy property?

Yes, you can sell a Help to Buy property, but it can be a little more complicated than if you were selling a home bought via more traditional methods.

This is because you’ll have to pay back the money you borrowed for the Help to Buy loan to sell the home. When your Help to Buy loan was secured, a condition would have been put in place that explains you cannot sell your home unless you pay off the loan.

Luckily, this isn’t as daunting or complicated as it may sound.

What if I have already paid back my Help to Buy loan?

If you have been paying back increments of the loan during the time you have been living in the house and cleared it, you are no longer tied to the terms of the loan as it is completed. This is known as staircasing. You can only staircase by 10% or more of the property value, and each time you wish to make a payment, you must first obtain a market valuation report from a chartered surveyor.

EXAMPLE:

• Your house was bought for £300,000
• Your Help to Buy Loan was £60,000
• Your home is revalued at £350,000 at the time you wish to make a repayment
• You wish to pay back the minimum 10%
• You’ll pay back £35,000 (10% of the new £350,000 valuation)
• The balance of the loan is then 10% of your home value

How much will I pay back on a Help to Buy Loan?

The actual figure varies. Remember, the Help to Buy loan is based on 20% of the market value rather than a specific figure. This means that even if you borrowed £30,000, you could be paying back considerably more when you come to sell the home. Unless, of course, you staircased.

When you sell a home that was bought with a Help to Buy loan, you’ll need its value to be ascertained by a RICS surveyor. You’ll then pay back your borrowed share at the market value or the final sales price, whichever one is higher.

EXAMPLE:

• Your home was valued at £150,000 when you bought it
• You used a 20% Help to Buy loan – £30,000
• You have not staircased
• Your home is now valued at £225,000
• You’ll repay £45,000
• Should the home fall in value, when you come to sell, you’ll pay 20% of its reduced value

How do I sell my Help to Buy property?

Selling a Help to Buy property is fairly straightforward, but there are a few steps you’ll need to follow to ensure the sale goes through.

You start the process the same way you would if you were selling a house bought without the help of a scheme. Simply approach an estate agent and get your property listed with them so it can be presented to a willing audience of buyers.

The next stages are when things get a little different to normal.

Obtain a valuation report

Once viewings have taken place and offers start to come in, assess which offer seems best for you. If you find one you like, you’ll need to reach out to a RICS surveyor. They will carry out a Help to Buy valuation. Once this is completed, the valuation report, along with details of the offer, will be sent to your Help to Buy agent. They will then assess how much is left to pay on your loan. Remember, if you haven’t staircased, this will be 20% of the value of your house as it is now (not 20% of the price you paid for the home).

They will charge you approximately £200 for this service. This is charged each time you use them if other valuations need to be made.

Receive a redemption letter

A letter of redemption will arrive for you and the conveyancer. This will outline what is left to pay on the Help to Buy loan, what your initial lending was and how to pay it back.

Sell the house as normal

You can then go ahead with the sale as normal. Just remember, you must pay back the loan with proceeds from the sale. Not doing this would invalidate the sale.

Paying back the loan

With the house sold, you’ll need to contact the government-appointed Help to Buy team to organise making your payment. You can call them on 0300 123 4123. You can also speak to them regarding any queries over your loan, too. If you’re not selling your Help to Buy home, you’ll need to pay back the loan after 25 years or when you have paid off your repayment mortgage. There are occasions when you might be asked to pay back the loan, which would typically be if you’ve broken any terms of the loan agreement.

When can I sell a Help to Buy property?

You can sell your Help to Buy home whenever you like. Due to the interest-free period on the loan lasting five years, many people choose to sell before interest begins to accrue. You can certainly sell after the fifth year if you wish – you’ll just have interest charged at the current Consumer Price Index plus 2%. If you used the earlier Help to Buy scheme, your interest is charged at the Retail Price Index plus 1%. In both cases, it increases every April in line with these indices.

If you are looking to sell a Help to Buy property but are fast approaching the end of the interest-free period, we could help. We sell your house fast, in a timeframe that aligns with your exact needs. This means you can clear your Help to Buy loan and make plans for your future without worry.

We buy any home, and do it without charging you a penny. We do it extremely quickly, too. We can buy your home in as little as seven days if it suits you, or we can take longer if you need to get your affairs in order. Call us today and let’s get your house sold.