How Do I Repay My Help to Buy Loan?
In her latest Timms Blog, Conveyancer, Katie Holmes discusses how to pay back your Help To Buy Loan…
What Is A Help To Buy Loan?
When purchasing a home using Help to Buy (HTB), the government lends the purchaser up to 20% of the property’s value (or 40% in London), with the purchaser putting down a 5% deposit of their own money with the remainder covered by a mortgage.
When the property is registered at the Land Registry, the HTB loan falls behind the mortgage as a second charge.
What Are The Rules Of A Help To Buy Loan?
The HTB rules are clear in that you do not need to repay the loan until the property is sold or the mortgage term comes to an end. However, many people decide it is more cost effective to repay the HTB loan before then. Some people use their own savings to pay off the loan, others re-mortgage and take out additional borrowing.
The first step to take in repaying the HTB loan is to contact Target HCA, which is the company that acts on behalf of the Homes and Communities Agency, the department of the government that deals with Help to Buy.
Target will require a valuation survey carried out by a RICS qualified surveyor to ascertain the current market value of the property. The survey is valid for 3 months from the date it was produced. Therefore, if completion does not take place before the expiry date, a new survey will be required. You must also complete an application form, pay a fee and clear any arrears. Target will send your chosen solicitor a redemption pack confirming how much is required to repay the loan, which will be a percentage of the value of the property.
When your solicitor has explained this to you and you have agreed their fees and the amount required to repay the loan, the solicitor can deal with completion of your new mortgage. Or ask that you transfer the required amount to the solicitor in readiness for completion.
The solicitor will then send a legal undertaking to Target confirming all the necessary details including a completion date. Before completion can take place, Target need to be satisfied that all the details in the undertaking are correct. And, if so, they will issue an ‘Authority to Complete’ which authorises the solicitor to send the money required to repay the loan.
Once the loan has been repaid, Target will send the Land Registry notification and the second charge will be removed from the title of the property.
Further information on repaying HTB loans can be found here.
How Can We Help?
If you have any queries regarding paying back your HTB loan, please do not hesitate to contact me on 01283 561531 or via email at k.holmes@timms-law.com Alternatively, you can visit the conveyancing page of our website here.
January 2022