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Can I repay my Help to Buy Equity Loan early?
- AuthorWendi Coupland
Help to Buy was first introduced by the Government in 2013 with many people taking advantage of this scheme in order to purchase their first home. Once the equity loan reaches five years old interest starts becoming payable, which can encourage home owners to consider taking action and repaying the loan before any interest becomes due. Wendi Coupland, an Associate and Executive in our Residential Conveyancing department, explains more here about the Help to Buy Equity Loan, whether repayment of this early is possible and the process of doing so.
What is the Help to Buy Equity Loan?
The Government has over recent years implemented several different schemes to assist first time buyers mainly, such as the Help to Buy ISA, Lifetime ISA, shared ownership schemes and the Help to Buy Equity Loan.
Under the current support scheme launched on 1st April 2021, first time buyers can borrow up to 20% of the cost of a new build, or 40% in London. You would need to pay at least 5% of the deposit towards the property and would be required to use a repayment mortgage for the remaining 75%. This loan is interest free for the first five years, after which the interest fees start at 1.75% and the interest fee will increase each year based on the Retail Price Index.
When can I repay my Help to Buy Equity Loan?
If you have purchased your home using a Help to Buy Equity Loan you are able to repay this at any point after the date of completion of your purchase. You do not need to sell the property to repay the loan; you can repay it either by remortgaging the property or if you have other sufficient funds. The Help to Buy Equity Loan will be repayable at the market value of your property at the time of repayment and a valuation of your home would be required from an independent Royal Institute of Chartered Surveyors (RICS) surveyor.
Upon receipt of the valuation report from you, the organisation with which your Help to Buy Equity Loan is held will then use this to calculate the value of the loan and will provide the figure required to repay the equity loan. This will need to be done within five working days of the date of the valuation and you will be responsible for the valuation fee.
The valuation is only valid for a period of three months so it is recommended that you have everything in place either prior to instructing a surveyor or as soon as possible after doing so. This is particularly important when you are remortgaging your property as this will involve a new mortgage process which can take some time for the paperwork to be issued from the lender. If the original valuation expires, a new one will need to be obtained, resulting in further fees.
Do I need to instruct a Solicitor when repaying my Help to Buy Equity Loan?
You will need a Solicitor involved to manage the legal processes of repayment, even if you are not remortgaging your property. It is your Solicitor’s role to liaise with Help to Buy and ensure that all necessary paperwork has been issued with the correct details and information. The Solicitor will also be responsible for sending the funds to repay the equity loan and obtaining a sealed legal discharge, which proves that the loan has been repaid. This legal discharge is then sent to the Land Registry so that the equity loan is removed from your title deeds. If you are remortgaging your property then your Solicitor will also assist you with this process from start to finish.
It is vital to have your Solicitor in place as soon as possible once you have decided to repay your equity loan. Once the valuation has been completed, this will be sent to your Solicitor and this can take up to four weeks to be issued. The sooner you are able to provide details of your Solicitor to the Help to Buy organisation the less chance there will be of delays.
If you are considering repaying your equity loan or if you have any questions regarding repayments, you can contact Wendi on 023 8071 7460 or a member of the team using the contact details below:
Fareham: 01329 288121
Southampton: 023 8063 9311
Portsmouth: 023 9275 3575
Chandler’s Ford: 023 8071 7467
Waterlooville: 023 9277 6569
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.