Help to Buy was first introduced by the government in 2013, with many people taking advantage of the scheme to get a foot on the first step of the property ladder.
It refers to a shared equity scheme where first-time buyers can borrow up to 20% of the cost of a new build house (40% if you live in London).
Repaying your Help to Buy loan
If you have bought a home using the Help to Buy scheme, your loan is interest free for 5 years. The full loan must be repaid after 25 years. Alternatively, you can choose to repay the loan sooner, re-mortgage or pay it off when you sell your property.
When the time comes to sell, the amount you must pay back will be calculated based on the current market value of your home. Not the original purchase price.
Help to Buy valuations
Target (who have been appointed by the Home and Communities Agency to administer the Help to Buy scheme) require you to get an independent Help to Buy valuation from a RICS registered valuer. This independent Help to Buy valuation will determine the current market value of your property and, as such, the amount you must repay can be calculated.
If the value of your property has decreased, then the amount you must repay will be less than you originally borrowed. However, if the value of your house has increased, so will the amount you must repay.
When you have obtained a Help to Buy valuation from a RICS registered valuer, you must send it to Target who will tell you how much you need to repay.
It is important to note that your Help to Buy valuation will only be valid for 3 months. Therefore, it is vital that you plan your timings carefully as, if you get your valuation report too soon, it may not be valid by the time the sale on your property is completed.
This is also important to bear in mind if you are re-mortgaging as this process can take some time.
For more information regarding Help to Buy, check out our blog here.