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The Help to Buy equity loan has helped thousands of buyers to get onto the property ladder, but what happens when you are selling a home with a Help to Buy Equity loan? Who do you contact? What are the additional costs? And what else do you need to be aware of?
Selling a Help to Buy property is more complex than a straightforward home sale because you’ll need to pay back the equity loan you borrowed to buy it. There are some other steps you’ll need to take too such as getting your home valued by a chartered surveyor. Read on to find out more.
This guide is for people who bought through the Government’s Help to Buy equity loan scheme, which is now closed. The scheme allowed you to take out an equity loan of up to 20% of the value of the property, interest-free for the first five years. You could then buy a property with a 5% deposit and take out a mortgage for the remaining amount.
Yes. Unless you have repaid your loan in full through staircasing (the process whereby homeowners repay a loan in part via multiple payments), you will repay the Help to Buy equity loan simultaneously when you sell. When you originally bought your Help to Buy equity loan scheme property, a second charge would have been placed on your property title at the Land Registry. This means you can’t sell your home unless you pay off the equity loan.
Under the rules, the Help to Buy Equity loan must be repaid after 25 years or at the same time as you sell your home.
When you took out the Help to Buy equity loan, it was based on a percentage of your property’s value, not a fixed amount. So when you’re selling a Help to Buy property and need to repay the equity loan, you’ll repay the same percentage of the property’s value.
So if you took out an equity loan of 20% of the value of your property and have made no other staircasing repayments, you will need to repay 20% of the market value of your property or the sale price, whichever is higher. The market value is worked out by a Royal Institution of Chartered Surveyors (RICS) valuation survey.
For example, say you bought a £200,000 home with a 20% equity loan of £40,000. If the house is now worth:
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For any decisions or rulings relating to the equity loan scheme, you will need to contact Lenvi’s Help to Buy Team by emailing customerservices@myhelptobuyloan.co.uk or by calling 0300 123 4123. Lenvi Servicing is a private company appointed by Homes England in 2023 to administer Help to Buy and other homeownership schemes. They replaced the previous company, Target.
The process of selling a Help to Buy property is slightly different to a traditional house sale. Here’s how it works.
When you’re selling a Help to Buy property, you can sell your home on the open market in the normal way. See our step-by-step guide to selling and advice on how to find the best estate agent to help you with the process of selling your home.
Once you have received an offer on your house that you’d like to accept, you’ll need to have a Help to Buy valuation carried out by a Chartered surveyor.
When you have received your valuation report, the results are sent, together with any other relevant paperwork and the offer that you wish to accept, to your Help to Buy agent, who will then establish the total repayment amount. An administrative fee of £200 is also charged at this time.
The valuation report will be valid for 3 months and you must send it to the customer service team within 5 working days.
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After you’ve sent off your paperwork, you and your conveyancer will receive a redemption letter that will confirm that you can repay your equity loan, the percentage of equity loan you took out and an estimate of how much your repayments will be, based on the valuation report.
When you sell your home to repay your equity loan, the amount you repay will be based on either the market value or the sale price, whichever is higher.
When you bought your Help to Buy home your mortgage deal will likely have been one specifically available for Help to Buy properties. However, when you’re selling your Help to Buy property you may need to change your mortgage if your mortgage can’t be ported, which means taking your mortgage with you when you buy a new house. But even if your mortgage is portable, it might not be the best deal for you. Find out more in our guide Porting a mortgage explained.
You can sell your Help to Buy property at any time but many people choose to sell before the 5 year deadline hits as that’s when they will start paying interest on the equity loan.
When arranging your Help to Buy valuation, make sure that the valuation surveyor you use is a RICS qualified member. If you don’t do this you risk the valuation being rejected by your Help to Buy agent and another, acceptable, valuation being commissioned (at your own expense!).
This valuation is only valid for three months and if the loan has not been redeemed within that period, you’ll either have to pay for another valuation or apply for an extension. Any changes in the valuation will be then reflected in the redemption amount.
Add to this the other costs of selling a home – which you can get a full picture of in our guide on What is the cost of selling your home.
You can use our cost of moving calculator to get an idea of the costs involved in selling your Help to Buy property.
If the market value of your property falls below the original purchase price, you won’t be held liable for any shortfall in the loan providing that your market valuation is approved, that you have fulfilled all of your lender’s terms and that you are not in arrears over interest or management fee payments.
In some cases the Help to Buy Team may ask you to provide evidence to show that you have not knowingly under-sold the property. Once you have received permission to sell your home at a lower market value, the final repayment figure is calculated by deducting your outstanding mortgage balance from the market value or sales price (according to which is highest).
If your block of flats has certain types of external cladding, you may need a specialist valuation of your property. To find out possible next steps, you should contact the customer service team as soon as possible if your home as dangerous cladding.
See our step-by-step guide to selling for more advice on selling your home
Yes you can sell your Help to Buy property but there are steps you’ll need to take including paying back the equity loan.
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