Can I Sell a Help to Buy Property?

The Help to Buy scheme was a government initiative that helped thousands of people finally take their first steps onto the property ladder. With a portion of the property price funded via an equity loan and the rest by the buyer, it made securing a home much easier. The scheme has since ended, so no new applicants can apply. However, many of those who were fortunate enough to fund a property purchase via the scheme may now be looking at selling. The question is, can you sell a Help to Buy property? In simple words. Yes, you can sell a Help to Buy property, you’ll just have to pay the equity loan back first.

In this blog, we look at selling your Help to Buy home, so you can navigate the process and sell your house fast.

What is the Help to Buy scheme?

The Help to Buy scheme closed in 2022 but offered first-time buyers the chance to purchase a new build property with up to 20% (40% in London) of the property price covered via an equity loan. This loan would be interest-free for five years and see the buyers only need a 5% deposit to help with the property purchase. The remaining 75% (55% in London) of the property value would be covered by a mortgage. These values were capped though and in 2021, regional limits were introduced.

For example, in London the maximum property value eligible for the scheme was £600,000, in the Northeast it was £186,100.

With it being an equity loan, the amount that you owe changes over time. Should your house increase in value, you’ll owe more, should it decrease in value, you’ll owe less. It can be paid back during your time living in the home or paid back upon the sale of the property.

Is it hard selling a Help to Buy home?

It can be. As you must pay the equity loan back, there are a few more hurdles to jump over before everything can be settled. If you have paid back the loan before you sell, you can sell your home just like you would if you were selling a home you had purchased via a mortgage or outright.

If you haven’t cleared the loan yet and want or need to sell, you’ll need to go through specific procedures to ensure the loan is settled and your house is sold correctly. We will cover more of this a little further down the page.

To keep things as affordable and simple as possible, it is advised to pay back the Help to Buy loan within the first five years of having it. This way you avoid any interest and can sell the home without any complications relating to the loan.

Do I have to pay back the loan when selling a Help to Buy property?

Yes. As with any loan, the lender will want their money back. With a Help to Buy loan, it must be paid back within 25 years of it being taken or at the same time the house is sold. You could opt to staircase and make the final loan repayment smaller if you prefer. Staircasing is where you gradually pay back parts of the loan, reducing or settling the amount owed.

Homes purchased via the Help to Buy scheme have what is known as a second charge put against them with the Land Registry. This second charge means that you cannot sell your home unless you pay off the loan.

How much of the equity loan will I pay back when selling a Help to Buy property?

Much will depend on whether you have paid back any of the loan so far. If you have staircased, the overall percentage being borrowed will have reduced. If you have not, it will remain the same. What is important to remember is that the loan is based on a percentage of the property value and not a fixed amount.

This means you could be paying back much more than you borrowed, or much less, depending on the market value of the home when you sell.

For example, let’s say you purchased a property in London using the maximum purchase price of £600,000 and had a 40% loan. You would have borrowed £240,000. If, when you sell, that house is now worth £650,000, you’ll owe £260,000.

If though, the same property had dropped in value to £500,000, you will only owe £200,000.

How do I sell a Help to Buy property?

If you have already paid back the loan, you’ll be able to sell the home as normal. If you still owe money on the loan, you’ll need to follow specific guidelines.

List the property

The first part of the process is just the same as selling any other home. Find an estate agent that aligns with your aims and may offer specific services that help you complete a sale quickly. It would also be advisable to contact the Help to Buy team at Lenvi Servicing. Lenvi were appointed by Homes England to look after Help to Buy and other government scheme properties. You can let them know of your wish to sell and they can assist should any problems arise.

Get viewings and offers

Hopefully, your home is appealing to many and the offers start to be made. Should there be one you are willing to accept, you will need to let Lenvi know.

Get a Help to Buy valuation

You’ll need your property valued before it can be sold. This can’t be a standard estate agent valuation. Instead, it must be a specific Help to Buy valuation carried out by a RICS surveyor. The surveyor will send their valuation, along with the details of the offer you want to accept to Lenvi. Should additional paperwork be required, this will also be sent.

An amount will be calculated to illustrate what you owe based on this valuation. At this stage, you will also be charged approximately £200 for the service provided so far.

The valuation report provided by the surveyor is only valid for three months. As we all know, property sales can move slowly so it is advisable to act as fast as possible.

Receive a redemption notice

With all paperwork sent off the Lenvi, you should receive notification that the remaining balance on the Help to Buy loan can be paid back. This notice will show how much is owed and what percentage you borrowed alongside any additional fees or arrears that may apply.

Selling a Help to Buy property to repay the equity loan will see you paying back the outstanding percentage based on either the actual sales price or the market value, whichever is higher.

Authority to complete and legal undertaking

Now things are almost done and the sale, and loan payment almost complete. Your solicitor will make a legal undertaking under the terms of the Help to Buy scheme. Lenvi will now issue an Authority to Complete. This should be issued no more than five days after the solicitor has sent their legal undertaking.

You can now complete the sale and pay back the outstanding amount.

When can I sell a Help to Buy home?

Selling a Help to Buy property can happen at any time you choose. It may be worth waiting until there is a little equity in the home though. It could also be advisable to wait until you have cleared the equity loan or at least made a dent in it. The Help to Buy loans are interest-free for five years, after which things can get costly so clearing it fast is highly recommended. This also means that when you do choose to sell, more of the money made from the sale is yours, and if the value has increased, you’ve made a tidy profit!

I’m selling a Help to Buy home after five years, what will the interest be?

For the first five years of the loan, there is zero interest charged. However, it can soon mount once you go past this five-year timeframe. It has been calculated that interest could reach astronomical amounts. Just two years back, Money Saving Expert calculated that a £200,000 home with a £20,000 deposit and £28,500 borrowed on the scheme could see interest reach more than £30,000 after 25 years!

If you are looking for a fast sale with no expense, Bettermove could be your option. We can put your home in front of multiple cash house buyers allowing for offers that are supported with guaranteed funds. Furthermore, we do all this for free. We sell your house for free, removing the costs normally associated with selling your house making it easier for you to get the cash you deserve. Remember, if you still owe money on your Help to Buy loan, you will need a RICS surveyor to conduct your valuation. Should the loan be cleared though, we can view the home and value it right away. Contact us today to find out more.