The Help to Buy Scheme is the current equity loan assistance from the Home and Community Agency to buyers of properties in England and Wales. It offers up to a maximum of 20% with a 40% maximum in London. The Help to Buy scheme itself is operated by developers but the 20% is funded by the HCA. It is a scheme that has been operating since 2013 and replaced the original schemes such as First Buy and Home Buy Direct. The Government have extended the scheme and announced in November 2015 that it was likely to extend to 2021 but this would depend upon whether the funds were available up until that point.
The principal of the Help to Buy Scheme is that the purchaser provides 5% deposit, the HCA or Government provide 20% of the deposit and the mortgage lender makes up the remaining 75%.
The loan itself does require repayment after 25 years or earlier if you sell your home. It is also possible to re-mortgage or repay the 20% loan at any time during the 25 year period. It is important to note that the 20% is calculated on the market valuation at the time of repayment and this will be calculated by a Help to Buy valuation.
The market value will take account of comparable evidence as defined by the criteria from Target.HCA who are the administrators for the repayment of the deposit.
The 20% repayment is calculated at the market value at the time and is therefore not dependent upon your original purchase price. For example if your value has decreased – and as long as the comparable evidence is provided and the RICS registered surveyor confirms a fall in the values in the Help to Buy valuation – then the HCA should accept less then they originally lent you on the purchase of the property. If the value exceeds your original purchase price then the 20% calculation will take account of the increase in value and you will repay more than you originally borrowed – namely 20% of the higher market value.
If you were to sell your property then the HCA will require a calculation based upon the higher value of either your sale price or the RICS valuation.
In order to determine the repayment value then you will need to instruct a Help to Buy scheme valuation and follow the process as determined within the Target Customer Information Pack.
A copy of the Customer Information Pack can be found on our website along with the appropriate advice for the redemption process.
We have carried out over 5000 Help to Buy valuations and desktops advising on valuation and the redemption process.
RJHarmer Ltd is a RICS registered Surveyor