What is Help to Buy?
Help to Buy is the collective name for a range of government schemes aimed to help First Time Buyers take their first step onto the housing ladder.
It includes Shared Ownership and the Help to Buy ISA (up until November 2019), but their Help to Buy Equity Loan is the one that would require you to get a Help to Buy Valuation.
Help to Buy Equity Loan
With a Help to Buy Equity Loan you save up a 5% deposit and the government will lend you a further 20% of the property price (40% in London). This enables you to buy a property by taking out a much smaller mortgage. The loan is interest-free for five years, with the only cost being a management fee of £1 per month.
You’ll pay off the loan when one of the following things happens:
You can decide to pay the loan back whenever you like, if you have been saving up, or receive some money you may want to pay it back so that you don’t have to worry about the increasing interest. You can pay back the whole 20% in one go, or you can pay half now, and then pay back the rest at a later date.
You’ll need to get a Help to Buy valuation when you want to pay back the Help to Buy Equity Loan.
This is because you’ll pay back 20% (or 40%) of the current market value, not the monetary value you borrowed in the first place. As a result you’ll need to know an up-to-date market valuation for the property.
Depending on what has happened with the property market since you bought the property, you might end up paying back more or less than you borrowed.
What happens in a valuation?
A valuation will involve a Chartered Surveyor visiting your property and assessing it, inspecting both the inside and the outside. They’ll take condition, age and size into account, as well as the presence or absence of features such as off-street parking. They’ll also consider development potential, for example if there’s space to extend the property.
They will consider it with an awareness of similar types of property in the area, and compare it with these to ensure the valuation considers both the property features and the area.
It should take about an hour, and you can use it as an opportunity to ask any questions you might have.
Read more about what happens in a valuation.
When do I get a Help to Buy Valuation?
When you’re selling
If you’re selling, the right time to get a Help to Buy Valuation is after you’ve received an offer for your property.
You can sell the property on the open market even if you purchased it using a Help to Buy Equity Loan. You’ll need to pay off any outstanding fees or interest before you complete the sale.
When selling a property bought with a Help to Buy Equity Loan you’ll need to contact Target at My First Home. Target is the firm that takes care of all the administrative aspects of Help to Buy. They’ll be able to take you through the process and answer any questions you might have. You can contact them by emailing [email protected] or by calling 0345 848 0235.
Once you’ve received the valuation you won’t be allowed to sell the property for less than the stated value.
When you’re paying off the loan
You can pay off your loan at any time, but it’s worth being aware of the property market and the value. Make use of the interest-free period but be aware that the more your property increases in value, the more you’ll have to pay back.
Keeping track of property prices in your area can help give you an idea of the right time to pay the loan back. Have a look at our House Price Forecast to help.
Read more about what a valuation is.