The Help to Buy: Equity Loan scheme for new builds was first introduced in England in April 2013 and was designed to help first-time buyers with smaller deposits purchase new properties. The scheme fully ended in March 2023 but helped many thousands of people jump onto the property ladder a few steps ahead then starting from the bottom. For those that purchased at least five or six years ago, you will soon be coming or have already, come to the end of your initial interest free period and so this is the ideal time to think about saying goodbye to your Equity Loan.
However, in order to do this, you will need to do a few things beforehand. Here is our checklist to ensure that you are in the best position to repay your Equity Loan:-
- Obtain a RICS Valuation. This is a formal valuation to ascertain the current market value of the Property. The amount of Equity Loan you repay is then based on a percentage of the market value, normally 20%. It will need to be appreciated that the percentage you repay will be based on the current market value of the Property, not what you paid when you purchased it, therefore unless we are in a massive recession, it will be more than what you originally borrowed. The most important thing to note is that the valuation is only valid for 3 months from the date of the report, so you need to make sure that you make your application to repay the loan as soon as possible thereafter.
- Instruct a solicitor to assist you with the repayment of the Equity Loan as you will need to provide this information to the Help to Buy Agency. You will be unable to repay your loan without one.
- Visit the gov.uk website regarding Equity Loans. They provide the application form that you need to submit, along with information as to fees that need to be paid. It is at this point that you need to confirm who your solicitor will be and also provide them with your RICS valuation.
- If you are not repaying your loan using a remortgage of your property, then please ensure you have sufficient proof of how you will be paying off your Equity Loan. If this is from savings then you should get together your bank statements showing how you have accumulated your funds, if a gift from a family member, then information from that family member confirming how they have obtained their funds, or if from inheritance, a copy of the estate accounts showing you as beneficiary to that sum. Solicitors are bound by very strict regulations in regard to source of funds, and so they will not be able to complete the repayment without satisfactory source of funds evidence.
On receipt of all the above, the Help to Buy Agency will issue a redemption statement confirming the sum that is required from you to repay your loan. The solicitor needs to produce various legal documents requesting authority from the help to buy agency to repay the loan on a specific date. Only once this authority has been obtained can the loan be repaid.
As you can see, the process is not entirely straightforward. If you are remortgaging your property and keeping your Equity Loan or are changing the owners of the Property with an existing Equity Loan, then there are further complications to these procedures, and again cannot be undertaken without the assistance of a solicitor.
Here at WBW, our Partner Solicitor, Sam Thompson, specialises in this aspect of work therefore if you are looking at dealing with any aspect of your Equity Loan we are happy to help. You can contact Sam by telephone on 01626 202398 or email samthompson@wbw.co.uk.
WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
