Repaying your Help to Buy Equity Loan - What are the options?

Help to Buy was first introduced by the Government in 2013, with many people taking advantage of this scheme to purchase their first home. Once the equity loan reaches five years old, interest becomes payable, encouraging homeowners to consider taking action and repaying the loan before any interest becomes due. Wendi Coupland, an Associate and Executive in our Residential Conveyancing department, explains more here about the process of doing so. 

What is the Help to Buy Equity Loan?

Over the years, the Government has implemented several different schemes to assist first-time buyers. Popular schemes included the Help to Buy ISA, Lifetime ISA, shared ownership schemes, and the Help to Buy Equity Loan. 

Under the existing support scheme launched on 1st April 2021, first-time buyers could borrow up to 20% of the cost of a new build or 40% in London. You were required to pay at least 5% of the deposit towards the property and use a repayment mortgage for the remaining 75%. This loan was interest-free for the first five years, after which the interest fees start at 1.75%, increasing yearly based on the Retail Price Index. 

When can I repay my Help to Buy Equity Loan?

If you purchased your home using a Help to Buy Equity Loan, you could repay this at any point after the date of completion of your purchase. You do not need to sell the property to repay the loan; you can repay it by re-mortgaging or using other sufficient funds. The Help to Buy Equity Loan will be repayable at the market value of your property at the time of repayment, and a valuation of your home will be required from an independent Royal Institute of Chartered Surveyors (RICS) surveyor. 

Upon receipt of your valuation report, the organisation with which your Help to Buy Equity Loan is held, will use this to calculate the value of the loan and provide the figure required to repay the equity loan. This will need to be completed within five working days of the valuation date, and you will be responsible for the valuation fee.

The valuation is only valid for three months, so it's recommended you have everything in place either before instructing a surveyor or as soon as possible after doing so. This is particularly important when re-mortgaging your property as this will involve a new mortgage process, and it can take some time for the lender to issue the mortgage offer. If the original valuation expires, a new one will need to be obtained, resulting in further fees. 

Do I need to instruct a Solicitor when repaying my Help to Buy Equity Loan?

You will need a solicitor to manage the legal processes of repayment, even if you are not re-mortgaging your property. Your Solicitor’s role is to liaise with Help to Buy and ensure that all necessary paperwork has been issued with the correct details and information. The Solicitor will also be responsible for sending the funds to repay the equity loan and obtaining a sealed legal discharge, which proves the loan is repaid. This legal discharge is then sent to the Land Registry so that the equity loan is removed from your title deeds. If you are re-mortgaging your property, your Solicitor will also assist you with this process from start to finish.

Having your Solicitor in place as soon as possible is vital once you have decided to repay your equity loan. Once the valuation is complete, this is sent to your Solicitor and can take up to four weeks to be issued. The sooner you can provide details of your Solicitor to the Help to Buy organisation, the less chance there will be a delay.

If you are considering repaying your equity loan or if you have any questions regarding repayments, you can contact Wendi on 023 8071 7460 or a member of the team using the contact details below:

Fareham: 01329 288121
Southampton: 023 8063 9311
Portsmouth:  023 9275 3575
Chandler’s Ford: 023 8071 7467
Waterlooville: 023 9277 6569
Email: conveyancingquote@warnergoodman.co.uk

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.