Selling House Bought With Help To Buy Equity Loan

Looking at what a Help To Buy equity loan is, what it means for you as a homeowner and how it will affect selling a home with a help to buy loan.

Selling a home is one of the most stressful experiences that a person can go through. From arranging house viewings, sorting out solicitors’ fees, and finding a new property are just some of the many jobs that sellers have to undertake. And this without having to worry about how your help to buy loan will affect the house sale.

Whilst a Help To Buy equity loan is a great way for people to be able to achieve their dream of homeownership and get onto the property ladder, what does it mean for you when it is time to sell your property?

In this blog post, we will be looking at what a Help To Buy equity loan is, what it means for you as a homeowner and how it will affect selling house with help to buy loan.

What Is A Help To Buy Loan?

A Help To Buy equity loan is a loan that you can get that will allow you to climb onto the property ladder and purchase a new-build property up to the value of £600,000 interest free for five years. The way this works is that first-time buyers can borrow up to 20% of the value of the property. They can then purchase their home with just a 5% deposit and then take out a mortgage for the remaining 75%.

There are catches to the Help To Buy equity loan such as you must be a first-time buyer and there are price caps depending on whereabouts in the country you live.

Rather than a straightforward fixed amount, an equity loan is not fixed, and instead the amount you owe changes in line with the market value of your property. This means that if the value of your home has risen, then your equity loan repayments will be more than you originally borrowed. It also means that if the value of your property has gone down, you will have to pay back less than you originally borrowed. 

Help To Buy Equity Loan Price Caps

According to Zoopla, the following are the help to buy equity loan price caps for the following regions across the UK. 

Do I Have To Pay Back My Help To Buy Equity Loan Before I Sell?

If you take out a Help To Buy equity loan then you are expected to pay it back after 25 years or at the same time that you decide to sell your house.

If you purchase a property using a Help To Buy equity loan, a second charge is then placed on your property title at the Land Registry. This means you can’t sell your home unless the Homes and Committees Agency (HCA). What this means is that until the HCA has their loan percentage repaid, you cannot sell your property.

Unless you have paid your loan in full through staircasing, you will have to repay the HCA’s equity loan at the same time as you sell. Staircasing is when homeowners repay a loan in part via multiple payments.

How Much Equity Do I Have In My House?

How much equity you have in your house depends upon the value of your property. Just as the price of properties can go up, the value of your property falls as well. If this has happened to your Help To Buy property then you will only have to repay the percentage of the loan at your home’s current market value when you sell it.

So, if you bought your home for £200,000 and took out a 20% Help To Buy equity loan to purchase it at £40,000.

But if you have your house valuated and it is now only worth £180,000, you would need to pay back 20% of that £180,000. This means that instead of paying back the £200,000 that you borrowed, you would pay back £36,000.

Can You Sell A Help To Buy Home Before Five Years?

If you decide to put your help to buy house up for sale, then you can sell it whenever you want, before or after the first five years but you will need to repay the equity loan.

As the house is in your name and yours to sell whenever you want to.

When Can I Put My Help To Buy House For Sale?

When you want to put your help to buy house for sale is completely up to you. As previously mentioned as the help to buy house for sale is owned by you, you can legally sell it at any time. It is a good idea, however, to wait until you have built up some equity in your home. You can do this by putting down mortgage payments while the property value rises. .

It can also be a good idea to wait until you have made all of your equity loan repayments before you start the selling process, although you don’t have to.

Is It Harder To Sell A Help To Buy Property?

Selling a Help To Buy equity loan property can be harder than selling a property that is not. If you have already paid back the equity loan on your Help To Buy property, then selling it will be the same as selling any other property.

It is always best to pay back the equity loan within five years when it is interest free. If you haven’t paid the equity loan on your property, then the sale becomes more complicated.  

When you decide to put your house on the market, you will have to inform Target. They are the HCA agency that handle the Help To Buy admin. It is also important that you have the property valued by a chartered surveyor.

In order for the valuation to be accepted by the HCA, the surveyor must be a member of the Royal Institute of Chartered Surveyors (RICS).  

After the valuation has been completed, the results are sent off to Target, along with the offer you wish to accept and any necessary paperwork where a £200 admin fee is charged.

Time is of the essence in a Help To Buy property sale where the equity loan has not been repaid as the valuation is only valid for three months, after which you will have to pay for another valuation or apply for an extension if your loan is not repaid in that timescale. 

Selling House With Help To Buy Loan

When it comes to selling a property purchased with a help to buy equity loan there are three main ways that you can sell. You can do it through an estate agent, auction, or cash buyer. Each of these ways bring their own pros and cons depending on which outlet you decide to go down.

Estate Agent

An estate agent is the most common way for people to sell their properties. An estate agent will undertake all of the responsibilities that come with selling your property for a cut of the final profit, called a commission.

One of the biggest advantages to selling through an estate agent is that they will do all of the hard work behind the sale for you, including creating a listing for your property and advertising it for you.

However, the downside is that finding a buyer on the open market can be difficult and time-consuming, sometimes taking months. When selling a property with an unpaid equity loan speed is critical and so waiting around for a buyer should be avoided in order to incur further fees.

Another downside to selling through an estate agent is that it can be very time-consuming, which if you have just received your HCA valuation, is not ideal. You will need to book house viewings at your home for potential buyers, which can be a lengthy and inconvenient process. It will involve taking time off from work, making sure that if there are any issues in the house that they are taken care of and at the end of the viewing you still may not even have a buyer.

It also means that after you have paid the estate agency fees and taken time off work for viewings, you will still have other fees to pay such as legal fees and removal cost. These extra costs add up and can eat away at the final profit considerably.

Auction

Another route you can down for selling your Help To Buy property with an unpaid equity notice is to sell your property through an auction.This is an option that has traditionally not been explored as much but over recent years has surged in popularity in recent years.

The way a property auction works is that you put it up for sale at a housing auction, agree on a minimum reserve price and if that price reserve is met then the property is sold to the bidder.

A positive to selling through this way is that buyers are often very serious about purchasing as they will lose their deposit and incur fees if they back out of the sale. This means that the chance of your sale falling through is much lower than if you were to sell through an estate agent.

However, the biggest downside to selling through an auction is the time aspect. Speed, as we have already discussed, is an incredibly important aspect of a unpaid equity loan purchased property as if your home is not sold within those three months it means spending more money on more valuations. Once you have listed your property for sale, you will have to wait for the next auction which could be weeks or months away. Even after the auction is complete, you will still need to wait for the paperwork to go through which can add an additional month or more to the process.

Furthermore, selling at an auction is not without cost. Auctioneers, like estate agents, charge a commission to cover the costs of marketing and selling your home.

Cash Buyer

The third option for selling a house with a Help To Buy equity loan is to sell it to a cash buyer. A cash buyer is a great option for people who are looking to sell their Help To Buy equity loan purchased homes as they can guarantee a quick sale in a timescale that suits you.

Another positive to selling through a cash buyer is that they have plenty of experience in selling houses in all kinds of circumstances and conditions, meaning that purchasing a property with an unpaid equity loan is just another day in the office.

If this sounds like something that you might be interested in, then look no further because we are here to help!

Here at The Property Buying Company, we are a cash buyer of houses who buy any house in any location in a time scale that suits you! Perfect if you have just received your HCA approved valuation! Plus, we cover all fees – even legal ones!

We will only require one quick viewing to make sure that our cash offer is accurate and as we are a genuine cash buyer, once you have accepted our offer, that is the amount that will be in your bank in FULL!

We are also a member of the National Association of Property Buyers and The Property Ombudsman, as well as being rated excellent on Trustpilot, with over 1000 reviews, allowing you to feel safe in our hands.

So, if you are ready to put the stress of selling a Help To Buy home with unpaid equity loan behind you, give us a call or fill in our online form for a free, no-obligation CASH offer which we could have in your bank as soon as you choose…