How to Repay Your Help to Buy Equity Loan

The Help to Buy Equity Loan scheme, a government initiative, has supported numerous individuals in acquiring new-build homes. This program aims to make homeownership more accessible by providing an equity loan that supplements a buyer’s deposit and primary mortgage. Repaying this loan is a key financial commitment for homeowners. This article details the various scenarios that necessitate repayment, how the repayment value is determined, the steps involved in initiating a repayment, and the associated costs.

When Repayment Becomes Necessary

Repaying a Help to Buy equity loan is triggered by several key events. The loan must be repaid in full when the property is sold. This ensures the loan is settled as part of the property transaction.

Another mandatory repayment event occurs at the end of the loan term, typically 25 years from the date the loan was taken out. Should the homeowner pay off their initial repayment mortgage without replacing it, the equity loan also becomes due in full.

Homeowners also have the option for voluntary repayment, either in full or in part. A full voluntary repayment allows for early settlement of the entire loan balance. Partial repayments, often referred to as “staircasing,” enable homeowners to gradually reduce the government’s equity stake by making payments in increments, usually a minimum of 10% of the property’s current market value.

Determining the Repayment Value

The amount due for repayment on a Help to Buy equity loan is not based on the original amount borrowed but rather on the property’s current market value. If the home’s value has increased since purchase, the repayment amount will also be higher, reflecting the government’s percentage share of the appreciated equity. Conversely, if the property’s value has decreased, the repayment amount will be lower.

To establish this current market value, an independent valuation report is required from a Royal Institution of Chartered Surveyors (RICS) regulated surveyor. This valuation must be conducted by a qualified RICS professional who is independent and unbiased. The report must include at least three comparable property sales within a two-mile radius from the last 12 months, and these comparables should be similar in type, size, and age to the subject property.

The RICS valuation report is valid for a limited period, typically three months from its issue date. It must be submitted to Homes England, or their appointed administrator, within a short timeframe, often five working days, to ensure its acceptance. If the repayment process extends beyond the three-month validity, a desktop valuation or a new RICS valuation might be required to re-confirm the property’s value, which incurs additional costs.

Initiating Your Repayment

Initiating the repayment of your Help to Buy equity loan involves specific procedural steps, whether you are making a partial repayment (staircasing) or a full repayment. For partial repayments, homeowners typically begin by contacting Homes England or its administrator to express their intent to staircase. After this initial contact, obtaining an independent RICS valuation is the next step to ascertain the property’s current market value, which directly influences the repayment amount.

Once the RICS valuation report is secured, it must be submitted to the administrator. Homeowners then engage a solicitor or conveyancer who will manage the legal aspects of the transaction. The solicitor processes all necessary paperwork, including the Deed of Postponement if a new mortgage is being taken out to fund the staircasing, ensuring the main lender’s charge remains primary. The administrator will then issue a repayment statement, and upon receipt of funds, the solicitor will complete the repayment and arrange for the equity loan to be partially discharged from the property’s title deeds.

When selling the home, the process for full repayment is integrated into the property sale transaction. The homeowner or their appointed solicitor informs the Help to Buy administrator of the sale. An RICS valuation is still required to determine the government’s percentage share of the sale proceeds. The solicitor handling the property sale will coordinate with the administrator to ensure the equity loan is repaid directly from the sale proceeds upon completion, and the second charge on the property is removed from the Land Registry.

Associated Repayment Costs

Beyond the equity loan amount itself, several additional costs are typically incurred during the repayment process. A primary expense is the valuation fee for the RICS surveyor, which can range from approximately £300 to £500, depending on the surveyor and location.

Legal or conveyancing fees are also a notable expense, as a solicitor is required to handle the intricate legal documentation and processes involved in loan repayment or staircasing. These fees can vary but commonly fall within a range of £400 to £900. Additionally, Homes England, or their appointed administrator, levies an administration fee for processing the repayment, which is typically around £200 for each repayment transaction.

If the repayment is funded through a new mortgage or a remortgage, further costs might include mortgage arrangement fees, which vary significantly among lenders and product types. While the equity loan itself does not have early repayment charges, these associated professional and administrative fees are separate and must be budgeted for by the homeowner.