Selling guide – redeeming a Help to Buy equity loan
If you are planning to sell a property purchased under the Help to Buy scheme, there are a number of steps you must take prior even to marketing the property. When you purchased the property, as well as granting a mortgage (legal charge) to your Bank or Building Society, you will have also granted a charge to the Homes and Communities Agency (HCA) to repay a percentage of the sale proceeds. It is anticipated that you will be required to repay the same contribution percentage of the eventual sale proceeds i.e. where 20% of the initial purchase price was contributed, 20% of the final sale price will need to be repaid.
Prior to marketing the property (and prior to formally instructing an estate agent)
In order to establish the figure payable to the HCA you are required to serve a written Notice to the Homes and Communities Agency (HCA) of your intention to sell. Within 14 days you must apply to the appointed valuer to assess the market value. The valuer must be an independent qualified valuer appointed by agreement between both parties. Find out more about this below.
The valuation must then be provided to the HCA within five working days of you receiving it. The valuation will remain valid for three months.
In certain circumstances, should there be a reduction in the value of the property, you could remain responsible to repay the entire sum of the original percentage contribution/loan and therefore be liable for payment of any shortfall. There may be provision for a shortfall to be written off, but this is not guaranteed.
If you and the HCA do not agree on the market value at any proposed repayment stage or at the end of the term, a further valuer will be appointed by the Royal Institute of the Chartered Surveyors.
Obtain a valuation
To produce a redemption figure, a valuation must firstly be carried out by a RICS Certified Surveyor. Once this report has been created, it must then be sent to the HCA or their agent appointed to handle the administrative duties of the loan. As of 16/06/23 the contact details are:-
Email: [email protected]
Post: Help to Buy Customer Service team, PO Box 5262, Lancing, BN99 9HE
Importantly, the RICS valuation will only be valid for three months. If redemption (completion of your sale) does not take place within the three months, Homes England must be provided with a Desktop Valuation, i.e. without physical examination, re-confirming the property value.
If the transaction is not completed within six months from the date of the original valuation, a new, full, valuation must be obtained.
It is up to the seller to obtain and fund the valuation, and the appointed RICS surveyor must ensure they and the valuation fulfils the following requirements:
- Must be independent to an estate agent,
- Must be on headed paper, signed by the surveyor and addressed to Homes England,
- Supplied as a PDF file or a digital document that you cannot edit
- At least three comparable properties and sale prices must be provided, which are like for like and within a two mile radius of the property,
- Must not be related to client,
- The interior of the property must be inspected,
- Must be a full valuation report,
- Bank or mortgage purpose valuations are not acceptable,
- The date of inspection must be on the report.
A report that does not meet the above requirements will need to be amended and rectified!
Desktop valuation requirements
As noted above, if the transaction does not complete within three months of the report, a Desktop Valuation may be submitted, but it must follow the below stipulations:
- It must be from the same individual surveyor who originally inspected,
- Must be sent to Homes England within two weeks of the original valuation expiring,
- Must make reference to the original report and confirm it is a Desktop Valuation,
- The valuer must provide a minimum of six comparable properties and sale prices within the last year if the property has changed in value,
- The report must have a new date on it signed by the valuer,
- It must be on headed paper and provided in PDF format.
Once a report has been successfully submitted to Homes England, you will receive an estimated repayment quote. All arrears must be cleared.
Redeeming your Help to Buy equity loan
Once you have sold your house and will need to ensure your chosen legal advisor is aware of and has full details of your Help To Buy loan as they too will need to take procedural steps to pay this off on your behalf.
You can use the same form if you are simply looking to repay your equity loan without selling your property. You can view a specific guide to redeeming your loan using your own money rather than via a sale here.
Homes England will then send a redemption letter, along with a guidance pack and a legal undertaking copy, which must be submitted by your conveyancer 15 business days prior to completion.
HCA issues an Authority to Complete (ATC)
Within five days from receipt of the undertaking, the ATC will be issued, allowing you
to complete the transaction.
Full guide available here.
Checklist and timetable for redeeming Help to Buy equity loan
- Obtain acceptable valuation – begins the three month window.
- Ensure valuation meets requirements.
- If in doubt of meeting the three month deadline, commission the desktop valuation and submit this within two weeks of the original three month window expiring.
- You now have a final three months to complete the transaction, or else you will need to repeat the process.
- Submit valuation to [email protected], and if accepted, you’ll receive the repayment quote.
- You may then complete the correct Loan Repay Form – return this with their fee (£200 as at 16.06.23).
- Your solicitor (details of which you will have given on the Loan Redemption Form) will be sent a redemption letter, a guidance pack and the draft solicitors’ undertaking.
- Your conveyancer will provide the undertaking at least 15 business days before completion.
- If completion is more than one week late, your conveyancer will need to submit a new undertaking (another 15 business days) and confirm the new redemption figure.
- After five days from submitting the undertaking, you and your conveyancer will receive the ATC, which is the Authority to Complete – only with this may you complete the transaction.