Do I need a solicitor to buy out Help to Buy?

You will need a solicitor to buy out Help to Buy, whether you are repaying some or all of the loan and staying in the home, or selling the house and balancing the Help to Buy loan from the sale proceeds. !form{579-popup Get a Quote}form!

How to sell a Help to Buy property with dangerous cladding

Some properties bought under the Help to Buy scheme were later found to be affected by dangerous cladding, following the tragic Grenfell disaster of 2017. If your property has dangerous cladding and is over 18m (or 6 storeys) then you may need an ESW1 form to verify that the property is safe. If the ESW1 says that the building requires remediation work, you may struggle to find a buyer as mortgage lenders may be unwilling to lend against the property until the defective cladding is replaced. Fortunately, if you are exempt from fire safety remediation costs under the Leaseholder Protections Act, those protections will transfer to your buyer with the leasehold, so there are now some lenders willing to lend against these properties. You will need a Deed of certificate to confirm your position. We discuss this in further detail in Selling a Flat With Cladding. Our excellent conveyancing solicitors have experience handling transactions of flats affected by the cladding crisis. If the transaction falls through, you'll be protected by our no sale, no fee, guarantee. Get a Conveyancing Quote Fixed Fee | No Sale No Fee | on 99% Lender Panels

How to Sell a Help to Buy property which has fallen in value

If your home is valued at a lower market value, the value of your equity loan will be worth less too. When you sell the property, you will repay the loan at its percentage of the Target-approved purchase price. You aren't be liable for the shortfall, so long as you've fulfilled the lender's terms and none of your interest or management fee payments are in arrears. If you expect the property's value to rise in the future, it may be worth repaying the equity loan now (while it is worth less) and selling the property later if and when the property appreciates. This is a gamble though as there is no 100% reliable way to predict the market.

A happy family move out of their Help to Buy home. How to sell a help to buy property; explained by SAM Conveyancing

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How to Sell a Help to Buy Property

by:

Caragh Bailey

Created on:

24/04/2023

(Last Updated: 24/02/2024)

Read by:

964

7 min read

Key Takeaways

You can sell a Help to Buy Property at any time
The process for how to sell a Help to Buy property is different from standard conveyancing, if you haven't yet repaid your equity loan.
You will need a Homes England compliant RICS Valuer.
Target must approve your buyer's offer.
The loan must be repaid in full, you can't take it to your next home.

The Help to Buy scheme has helped first time buyers purchase 291,903 homes in England and Wales. When it comes to selling a help to buy property there are additional stages to complete including:

Help to Buy Valuation Report (you can't use the estate agent valuation or mortgage valuation)
Redemption Statement
Authority to Complete

The Help to Buy administrator has now changed; please liaise with Homes England for customer services on your Help to Buy loan.

Can you sell a property bought with Help to Buy?

You sell help to buy property on the open market, like any other property. Any remaining equity loan debt will be repaid from the proceeds of the sale, after balancing the mortgage. This means that you would need a bigger mortgage to buy a new property of equal value, to cover the percentage of the equity repaid to discharge the equity loan.

Is it hard to sell a Help to Buy property?

It can be slightly harder to sell a Help to Buy property if the debt is unpaid. Your valuation will have to be carried out by a Homes England compliant RICS surveyor, at your own expense. If you use a different valuer, they can make you get a new survey with a compliant surveyor, so you'll end up paying twice.

Get a Valuation Quote

RICS Surveyors | Fixed Fees | Same week availability | Access arranged

The Help to Buy Administrator will then have to agree to the offer you want to accept. You'll need to send the valuation, repayment form, memorandum of sale and the offer you want to accept to your Help to Buy agent, along with a £200 administration fee. This is because you will be paying back a percentage of the total sale price. If you were to sell under market value, you'd get less and so would they. If they accept, they'll send you your redemption letter.

How to sell a Help to Buy property: Process

1

Get a surveyor’s valuation report

2

Instruct a solicitor

3

Pay the administration fee and any arrears

4

Complete the repayment application form

5

Receive a redemption letter

6

Your solicitor makes a 'legal undertaking' under Help to Buy terms

7

Help to Buy issue your Authority to Complete

8

The sale transaction can complete and the loan is repaid from the proceeds

What happens to my Help to Buy if I sell?

The loan must be repaid when you sell, which means you can't use it for your next purchase. The remaining percentage that you owe in your equity loan will be calculated from the sale price. The full amount of the equity loan and your outstanding mortgage will come out of the sale proceeds, and whatever amount is left remaining belongs to you, to do with as you like (usually to put toward a deposit on your next home).

Now that the Help to Buy scheme is closed, you can sell your Help to Buy property on the open market like any other transaction.

Moving your mortgage

You can't take your equity loan with you, so you'll have to buy your new home with your own cash as deposit and usually a mortgage. Your current mortgage is likely to be specifically tailored for Help to Buy properties, some were future-proofed to be portable, but many weren't, in which case you'll need a new one for your new home. This may leave you having to pay an early repayment charge to your old lender. Some lenders will waive the early repayment charge if you stay with them, but take out a new mortgage product. Contact your lender to find out.

Is it better to pay off Help to Buy before selling?

If you are able to pay off the Help to Buy loan before selling, it will save you from having to get your offer approved by Help to Buy and simplify the conveyancing slightly. There is no hard and fast rule about the best time to repay the loan; as with most loans, the sooner you pay it back, the less you will pay in interest, however, overstretching your finances to repay the loan early can be detrimental.

You'll begin paying interest on the equity loan after 5 years, but at a relatively low rate. If you can repay 10% or more with a cash sum, then doing so will save you paying this interest on however much of the loan you pay off. If you are remortgaging to repay the loan, it's probably better to wait until the interest rate on the equity loan rises to be comparable with your mortgage rate, but before it climbs any higher.

What is the downside of Help to Buy?

The downside of Help to Buy is the increasing interest rate which is payable on the equity loan. Whilst the first 5 years are interest free, and from the 6th it begins at a relatively low 1.75%, the rate of interest will increase each year, meaning ever increasing monthly payments.

The longer you wait to repay the equity loan and the higher the value of the property rises, the more you will pay back, as the loan is a percentage of the current value. We can't predict what will happen in the future, but house prices have trebled in the last twenty years. If this happens again and you wait 20 years to repay the loan, you could pay back 3x what you actually borrowed, plus the interest you'll have been paying each month.

The equity loan must be repaid within 25 years, but you should plan to repay the loan as early as possible. You will need to pay off at least 10% of the value of the home at a time (called staircasing). Some homeowners choose to do this by remortgaging, which relies on your monthly affordability increasing, as you may be able to borrow more, but you will not be able to extend the mortgage term beyond the original 25 year term of the Help to Buy mortgage. More debt to repay in a shorter time = higher monthly payments.

Frequently Asked Questions

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Written by: Caragh Bailey

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

Reviewed by: Andrew Boast

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

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