In this brief guide, we will explain what your options are if you are thinking of selling your help to buy a property before 5 years have passed since you got your help to buy equity loan. Are there any costs involved? Do you have to inform anyone about your help to buy sale?
The reason why 5 years is a key part of this query is because the help to buy equity loan is interest-free for the first years. After the first 5 years, you begin to make monthly repayments on your help to buy equity loan as you are charged 1.75% per year.
You will then be charged plus 1% every year after and you will also be charged any increase in inflation per year.
Can you sell your help to buy property before 5 years?
The short answer is yes. You can sell your help to buy property before 5 years but you will need to take into consideration your help to buy equity loan which you must repay once you sell your property. You will of course not have to repay or deal with the help to buy equity loan if you have already repaid it.
This works like this: if you took out a 20% help to buy equity loan you will need to pay the Government 20% of your sale price when you sell your home.
The amount you pay back will be either the sales price or property value (whichever is higher).
What happens to your mortgage when selling your help to buy property?
You will also need to pay off your mortgage with the proceeds of the sale except you are porting your mortgage to your new home.
Due to the fact that most mortgages you would have gotten for your help to buy property are unique to the help to buy equity loan, you may not be able to port it to a new mortgage and may have to pay it in full.
You may also have to pay an early repayment charge if your initial mortgage was a fixed rate mortgage.
Your mortgage lender may waive the early repayment charge if you get another mortgage with them when you buy your new property.
You should contact “Target” – the firm the homes and communities agency uses for all administrative duties regarding Help to Buy. You can do so by emailing [email protected] or by calling 0345 848 0235. Target will let you know how you can go about repaying your help to buy equity loan.
Can you sell your help to buy property on the open market?
Yes you can sell your help to buy property on the open market. You will need to inform Target, the agency appointed by the governments help to buy agency that you intend to sell the property. Target will detail out what you need to do and wait to hear back from you.
The key thing target will wait to receive from you is a valuation report on the property.
What are the costs of selling your help to buy home?
You will have to pay for the valuation which must be carried out by a Royal Institute of chartered surveyor. The valuation is only valid for three months afterwards and this means if your property sale doesn’t complete in that time you will need to carry out a new home valuation
You will also have to pay a £200 admin fee to the Governments help to buy agency when paying off your help to buy equity loan.
You may also have to pay for your solicitor who will handle the exchange of contracts
The cons of selling a help to buy property
One of the main issues with selling your help to buy property is that you may have to deal with negative equity. This is when your mortgage is worth more than the property. The problem here is that you will not have enough savings to cover the difference between how much you owe on your mortgage( plus any early repayment fees) and how much your help to buy property sells for.
The only upside here is that if the property price has fallen below what you initially paid for the house you will have to pay back less to the government.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.