Repaying your Help to Buy Equity Loan – What you need to know
2 May 2018 by Charlotte Cohen
I purchased through the Help to Buy Scheme, how long do I need to wait until I repay the equity loan?
The Help to Buy equity loan term matches that of your main mortgage. If your mortgage is for a term of 35 years, for example, you can repay the Help to Buy equity loan at any time in the 35 years from completion (there is no minimum requirement).
Do I need to repay the charge in full or can I make a part payment?
If you do not wish to make the full repayment of 20% of the current market value of your property there is a minimum requirement of 10% of the current market value. If you decide to proceed with the part payment, this is called “staircasing”. Once repayment has taken place the Memorandum at the rear of the Equity Mortgage will be updated to show the remaining equity loan percentage.
Do I need to instruct a solicitor to help me repay the equity loan?
The Help to Buy Post Completion Agent (currently Target) requires you to appoint a solicitor to deal with the repayment of the equity loan. Target will have several requirements and legal forms which your solicitor will need to complete and send to them during the transaction. Your solicitor will be able to guide you through the process.
Do I need to repay the charge with cash savings?
Many of our clients repay the equity loan using a number of different methods which include cash savings, the proceeds of sale (if they are moving), or monies from a remortgage or further advance. You will need to decide how you would like to repay the loan at the start of the process as if you need further financing you will need to apply for this first before starting the process of repayment. You will need to make an application with mortgage company and once approved, they will send their mortgage instructions to your solicitor.
How do I work out how much the repayment figure is?
The Help to Buy Agent requires that you instruct an independent Royal Institute of Chartered Surveyors (RICS) Surveyor to inspect the property and provide a valuation report which confirms the current market value of the property. You will be responsible for the surveyor’s costs in this regard.
Will there be any interest payable as part of the repayment figure?
If you repay the equity loan within the first five years from completion of your purchase, no interest will be payable. Interest payments start in the sixth year from completion.
Once I have the valuation report who does this need to be submitted to?
You will need to contact Target via their website to fill out a form to confirm you wish to make a repayment. There is a different form to use depending on how you are repaying the equity loan. You will need to submit this together with the valuation report and their administration fee (currently £200) in order to obtain a redemption figure.
I am selling, but the price agreed is more than the market value of the property. How will the repayment figure be calculated?
Once the repayment figure has been provided by Target your solicitor will need to submit a copy of the Memorandum of Sale and a copy of your Contract for confirmation of the sale price. Target will then revise the repayment figure to be calculated on the sale price.
What if I am selling for less than the market value of my property?
Target will calculate the repayment figure on either the current market value or the sale price, whichever is the higher.
How long does the valuation report last?
The valuation report is valid for 3 months from the date of issue. If repayment does not take place within this timescale you will need to arrange and pay for another valuation. This valuation can be a “desktop valuation” which needs to be provided by the surveyor who originally inspected the property and issued the first valuation report. The desktop valuation will need to be sent to Target within 2 weeks of the first valuation report expiring and will be valid for a further 3 months. If these requirements are not met, Target could require another full valuation to be undertaken at your cost.
Who do I make the payment to?
Once your solicitor has dealt with Target’s requirements and your funding options are in place, your solicitor will fix the completion date and either draw down the further lending required from your mortgage company or collect the sum required from you. Your solicitor will also request payment of their legal fees for the transaction. The legal fees will vary depending on the nature of your financing for the repayment. Please contact us for a quotation based on your requirements.
What evidence will I receive that the Help to Buy Charge has been removed?
Once repayment has taken place, Target will liaise with the Land Registry to remove the equity charge secured against the Title Registers for your property. Your solicitor will check with the Land Registry that the equity charge has been removed and will then provide you with a copy of the updated Title Registers for your records.
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