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Repaying Help to Buy Equity Loans

by Thi Chan — Posted on 6 November, 2019

Our specialist advice on repaying Help to Buy equity loan and the different options that are available to pay Target, the company which collects the loans.

Guidance on repaying Help to Buy equity loans to Target

What is the Help to buy scheme?

Help to buy was a scheme that was launched in April 2013 by the government which aimed to help first time buyers onto the property ladder by providing an interest-free loan worth up to 20% of the value of their property.

However, the terms of the loan stated that the loan would only remain interest-free for the first five years. The Help to Buy equity loan is a loan from the government for first time buyers which can be combined with a deposit and a mortgage to buy a new-build property.

Because most properties that used the help to buy scheme are coming up reaching the end of their interest-free period they will now be looking to repay their help to buy to Target and potentially move up the property ladder.

Help to Buy has gained some publicity in recent times, however some people still don’t know how to start repaying Help to Buy equity loans.

 

How do our solicitors deal with repaying Help to Buy equity loans with Target?

There are three ways to go about repaying Help to Buy equity loans:

  1. Repaying Help to Buy Equity Loans on sale

This is where the borrower pays back the loan in full as you can transfer the loan to a mortgage on a new property.

  • The loan amount is 20% of the current market value of the property or an agreed sale price, usually it will be whichever of the two is higher
  • This option is good in the circumstance that your house value has increased since the property was first purchased and you avoid having ton pay interest on the equity loan in the future
  1. Repaying Help to Buy Equity Loans without selling

This is where the borrower will pay back the loan in full but they do not take out another loan to help pay off the loan

  • The repayment value is then often a percentage of the current market value of the property

 

  1. Repaying Help to Buy Equity Loans gradually with Staircasing

This option is slightly more complicated in that there are two possible ways of doing it either they can:

  • Pay back the Help to Buy loan in part without taking out another loan

OR

  • Repay the Help to Buy loan in part by securing another loan with a different lender

 

Can you repay your Help to Buy Equity loan by remortgaging?

If the property has increased in value over the last five years you may choose to remortgage your property and release equity from the property itself in order to pay off the government loan.

You can either pay off half of the Help to Buy loan – 10% or you can choose to pay off the full 20%

However, when you do pay off the Help to Buy loan you must ensure that you pay the government either 10% or 20% of the current property value

If the circumstance is that your property has increased in value over the years since it was first purchased you will have to pay slightly more to the government however, this value is dependent on how much the value of the property has increased

You should check whether your lender will remortgage the property onto another product as not all lenders offer this service.

 

Who do you repay Help to Buy equity loans to?

Target Services Ltd are the company charged by the Housing and Communities Agency to deal with the redemption of your loan. Target are responsible for collecting the repayment of your Help to Buy equity loan and are the people who will need to be contacted to let them know you want to repay the loan.

Target will require you to get advice from our solicitors who will deal with the repayment of your loan on your behalf, our solicitors will liaise with Target throughout the process and our solicitors will explain the process to you so that you are aware of what is happening at each stage.

Once repayment has been completed it is Target, not our solicitors who will inform the Land Registry to remove the equity charge secured against the Title Registers for your property.  However, our solicitors will check with the land registry to make sure that the charge has been removed and we will then provide a copy to you.

 

What is Target’s repayment process?

Target list a number of steps you need to follow on their website when repaying your Help to Buy loan:

  • You will need a valuation of the property to be conducted by a surveyor and this report will need to be sent to Target
  • Our solicitors will then begin any legal conveyancing work
  • The Loan redemption form will then need to be completed and returned to Target
  • Once the form, administration fee and valuation are approved by Target we then receive a letter
  • Our solicitors will then deal with the legal matters checking for any issues
  • Target then issue an authority to complete and our solicitors will complete the transaction sending through the redemption money to Target upon completion.

For more information regarding repaying your Help to Buy loan please visit Target’s website.

How Starck Uberoi can help

Our experienced mortgage and Conveyancing team will deal with your matter efficiently to ensure you get the best deal when you are repaying Help to Buy loan. Our experienced conveyancing solicitors work closely with the mortgage team to provide the most efficient service. For more information, please visit our mortgage or Conveyancing pages, or to book an appointment please call 020 8840 6640. We are based in Ealing; our West London Ealing office is located 10 minutes from Ealing Broadway station. For an appointment at our London Belgravia office a few minutes from Victoria Station call 020 7824 5118.

 

Further Reading

About Thi Chan

Thi joined the firm as a Paralegal in March 2018. An ambitious addition to our team, Thi graduated with a law degree from the University of Kent and LPC from the University of Law. Thi currently works in our conveyancing department and hopes to eventually qualify as a conveyancing solicitor. Thi’s enthusiasm is reflected in her love for socialising and travel.