Help to Buy Staircasing: Pay off your Equity Loan
Key Takeaways
- Help to Buy Staircasing is when you opt to pay off part of your Help to Buy Equity Loan. This is different to shared ownership staircasing.
- Repaying some of your equity loan, like repaying some of your mortgage, increases the equity you own in your home, reducing your debt and liabilities, and can in turn reduce your monthly payments.
- However, you have to weigh up whether it is worth your while to do so, particularly if you are going to use another mortgage loan for the purpose, because of the way that Help to Buy equity loans differ from standard mortgages.
What are the requirements to Staircase a Help to Buy Equity Loan?
- The minimum amount you can staircase at one time is 10% (of the total market value of the property at the time you staircase);
- The above requirement means that when the lenders’ equity in your property is less than 20%, you can only repay the loan in full;
- You may only staircase in multiples of 10%, that is 10%, 20%, 30% etc; and
- You cannot staircase if there are any arrears of interest payments and/or management fees on your mortgage account. Any arrears must be cleared before a staircase transaction can proceed.
What is the Staircasing Process?
- 1Obtain a RICS valuation for the property
Read more - How do I get a RICS property valuation?
- 1Send application form to Help to Buy
Send Help to Buy Repayment Application form to the Administrator, including your RICS valuation, solicitor's details, confirm the % you are staircasing and pay your Administration Fee.
- 3Help to Buy Administrator responds to you/your solicitor
The Help to Buy Administrator confirms in writing whether they approve the valuation and how much you'll need to pay to settle the agreed share of the loan.
You/your solicitor should receive a reply from the Help to Buy Administrator within 10 working days. If your valuation isn't approved, they will contact you and may also wish to speak to your RICS valuation surveyor. This may result in a revised market valuation.
- 4Solicitor carries out the remaining staircasing legal work
This includes, among other things, ID checks and obtaining the redemption statement (if you're remortgaging to pay). Your solicitor has to email Target the statement that they will be passing over the full sum of money required for your staircasing on an agreed date falling before you intend to complete it.
This statement is known as an undertaking. Your solicitor must email the undertaking to Target at least 15 working days before the expected completion date.
- 5Authority to Complete
The Help to Buy Administrator issues the Authority to Complete within 5 working days of receiving the undertaking from your solicitor. Your solicitor can then pay over the funds on the date stated in the undertaking. When Target receives the cash, the amount is then validated against the figures stated on the Authority to Complete.
If this matches, the memorandum of staircasing is issued confirming your new - reduced - equity loan percentage, and you can then complete it on the date agreed and start to benefit from having to pay less interest on your equity loan.
What if completion is delayed?
If the completion date stated on the legal undertaking doesn't take place and is delayed by more than one week, your solicitor has to issue a new undertaking.
Are you ready to repay some of your equity loan?
Our panel of RICS Surveyors and Help to Buy Staircasing solicitors can handle the process from start to finish. Get a free call back to discuss your needs and get a tailored quote:
Two ways you can Staircase your Help to Buy Loan
a) With a lump sum
Usually a gift, inheritance, or savings. You simply follow the procedure outlined in sections 1 and 2 above.
b) With another loan secured on your property
In this scenario, when you liaise with the Help to Buy Administrator, they provide a Guidance Pack to your solicitor, who processes the Deed of Postponement document required by your main mortgage lender for this transaction. The Deed of Postponement ensures your lender is ranked as the first charge on your home.
The amount of other-lender borrowing permitted is restricted to the amount you must pay for your staircasing transaction. For example, if you are looking to staircase 10% and your property is worth £200,000, you will need to pay £20,000. In this example, the further borrowing you can take out is restricted to £20,000 – you may not exceed this amount.
Target cannot confirm the exact amount of alternate borrowing you can obtain until they have the required information. You should not arrange alternate borrowing before they send you confirmation of the amount you can borrow. However, you may contact your lender to ensure you can obtain the amount you estimate that you will require.