Selling a help to buy property

Last updated: March 2024 | 3 min read

Selling your Help to Buy home? Step into a unique niche within the broader how to sell your house journey. This guide, harmonising with tips for selling your home and how to sell a house without an estate agent, offers you bespoke insights for your specific situation. Discover the keys to navigating this special selling process, tailored just for you.

Understanding the help to buy equity loan

What is a help to buy equity loan?

A Help to Buy equity loan serves as a government-backed initiative to support first-time buyers or those stepping onto the property ladder.

This scheme allows purchasers to buy a new property with as little as a 5% deposit, with the government lending up to 20% (40% in London) of the property's value. This loan is interest-free for the first five years, providing a more accessible path to homeownership.

How does a help to buy equity loan impact property sales?

Selling a property purchased under the Help to Buy scheme involves additional steps compared to a standard property sale. The equity loan must be repaid upon sale, calculated as a percentage of the current market value, not just the initial loan amount.

This could mean paying back more than initially borrowed if the property's value has increased. Engaging a professional estate agent experienced in such sales can ensure a smooth process.

Preparing to sell your help to buy property

Steps to initiate the selling process

When selling a help to buy property, the first step involves contacting your Help to Buy agent. This action initiates the selling procedure. They guide you through the specific requirements of the Help to Buy scheme.

Next, appointing a qualified estate agent who understands the Help to Buy process is essential. They play a significant role in securing an agreed sale price that reflects your home's current market value.

Assessing your property's current market value

Engaging a chartered surveyor for accurate valuation

Engaging a chartered surveyor is a pivotal step in assessing your property's current market value. A surveyor's valuation report, prepared by a RICS qualified member, provides an accurate and objective valuation figure.

This report is vital for determining the final repayment figure of your equity loan and setting a realistic sales price.

Considerations for setting the sale price

When setting the sale price for your help to buy property, several factors come into play. You must consider the property's current market valuation, any improvements made since purchase, and the current housing market trends.

It's also crucial to be aware of the potential impact of a lower market value on your equity loan scheme repayment. Engage with your estate agent to establish a competitive yet fair price, reflecting both the open market conditions and your property's unique attributes.

Repaying the equity loan

Calculating the equity loan repayment amount

In the context of selling a Help to Buy property, calculating the repayment amount for your equity loan is a critical step. The repayment is not a fixed sum but a percentage of your property's current market value. This implies that if your home's value has increased since the initial purchase, so too will the amount you owe.

Conversely, a decrease in market value could mean a lower repayment amount. It's essential to have an updated valuation of your property to accurately determine this amount. The equity loan, being a portion of your property's value, aligns with the current market conditions, reflecting the dynamic nature of the real estate market.

Understanding the impact of market value changes on repayment

The interplay between your property's market value and the equity loan repayment is significant. Market trends can substantially influence the amount you need to repay. A rise in property values in your area means the equity loan amount, which is a percentage of the home's value, increases correspondingly. In contrast, a market downturn might reduce your repayment obligation.

This scenario underscores the shared risk inherent in the Help to Buy scheme, where both the homeowner and the lender are subject to the whims of the market. Obtaining a professional valuation, preferably by a chartered surveyor, is crucial for an accurate assessment of your repayment obligations, as it captures the current economic realities of your property's worth.

Procedures for repaying the equity loan

The actual process of repaying your equity loan begins with understanding the exact sum you need to repay, which hinges on your home's current valuation. The next step involves liaising with the Homes and Communities Agency or its equivalent in your region, the administrative body managing your Help to Buy loan. This agency guides you through the repayment steps, ensuring you are clear about the procedures and timelines.

Typically, the equity loan needs to be repaid concurrently with the completion of your property sale. This ensures a seamless transfer of ownership and the closure of your loan obligations. Adhering to the lender’s terms and conditions, which may specify particular protocols for repayment, is essential to avoid any legal or financial complications.

Contacting the homes and communities agency for repayment

Engaging with the Homes and Communities Agency is essential in the repayment process. This body oversees your Help to Buy equity loan and plays a pivotal role in facilitating its repayment. When you contact them, you’ll need to provide details of your property sale, including the sale price and date of completion.

They will confirm the exact repayment amount based on your home’s current market value. The agency's representatives will also guide you through the necessary steps for repayment, ensuring you meet all legal and procedural requirements. Effective communication with the HCA is key to a smooth repayment process, helping to avoid any delays or issues in finalizing your property sale.

Transferring your current mortgage

Transferring a mortgage, often known as porting, allows you to move your existing mortgage to a new property. This process is particularly relevant when selling a home purchased with a Help to Buy loan. Porting maintains your current mortgage terms, including the interest rate. However, not all mortgages are portable. Checking with your lender is the first step.

If porting is an option, the lender assesses your circumstances anew. Your financial situation, the property's value, and the loan amount are scrutinized. Lenders typically require a new valuation for the new property. If the new home's value exceeds the mortgage amount, an additional loan might be necessary. This could alter the interest rate or terms.

Options for mortgage settlement

Settling your mortgage involves paying off your current mortgage in full. This action typically occurs when you sell your property. The settlement amount includes the remaining mortgage balance and any applicable early repayment charges.

To initiate mortgage settlement, contact your lender for a redemption statement. This document outlines the total amount needed to settle your mortgage. It includes the outstanding balance, interest, and any early repayment charges. Be aware, early repayment charges can significantly increase the settlement amount, especially if you're in a fixed-rate period.

Calculating the outstanding mortgage balance

Calculating your outstanding mortgage balance is critical for financial planning when selling your home. The balance is the amount you still owe on your mortgage. It's not the same as your property's sale price or value.

To calculate this, start with the original loan amount and subtract the total amount you've paid towards the principal. Remember, monthly payments also cover interest, so not all of it reduces the loan balance. Check your latest mortgage statement or ask your lender for an exact figure. Be mindful of any fees or charges that might apply if you're settling your mortgage early.

Legal requirements for selling a help to buy property

Embarking on the sale of a Help to Buy property, you must first inform the housing association or registered provider. This communication is not just a formality; it's a legal requirement. Your Help to Buy agreement likely stipulates this as a first step in the selling process.

Next, a crucial task is obtaining a property valuation. This must be done by an approved surveyor, a requirement stipulated in most Help to Buy agreements. The significance of this valuation lies in its role in determining your equity loan repayment. The repayment is not a fixed sum but a percentage of the current market value of your property.

Role of solicitors in the sales process

In the complex web of selling a Help to Buy property, solicitors are your guides. Their role extends beyond general legal advice; they specialize in handling the intricate details specific to Help to Buy sales. This includes managing the legal aspects of the equity loan repayment and ensuring a seamless transfer of the property title.

Their expertise is particularly vital in liaising with the housing association and handling the land registry process. This includes preparing and filing all necessary legal documents, a task that requires precision and a deep understanding of property law.

Handling the administrative fees and other costs

Administrative fees, often overlooked in the initial stages, form an integral part of the selling process. These are not just limited to the solicitor's fees. A notable inclusion is the administration fee for the equity loan repayment. It's paramount to factor these into your financial planning to avoid unexpected financial strain during the sale.

Estimating additional costs in the selling process

Beyond the standard administrative fees, selling your Help to Buy home may incur additional, less anticipated costs. For instance, if you choose to settle your mortgage earlier than the agreed term, you may face an early repayment charge. Furthermore, if the market has not been favorable and your property's value has decreased, you might have to cover this shortfall out of pocket.

Accurately predicting and budgeting for these costs is crucial. They can vary significantly based on your property's situation and the terms of your mortgage and equity loan.

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