What is the Help to Buy Scheme?
The Help to Buy scheme was introduced in England and Wales by the Government in April 2013. At that time, it had become increasingly difficult for people to get onto the property ladder. This was largely due to rising house prices, wages not increasing, and being stuck in the cycle of renting with no way to save for a deposit. The Help to Buy scheme helped by giving people a loan for their deposit, meaning they are able to buy a property.
Can I still access this scheme?
The Help to Buy Scheme closed new applications on October 31st 2022 and any houses purchased under the scheme must complete by 31st March 2023 to be included. Unless you are currently a member of the scheme or you had your application in before October 31st you will not be able to access it. There has been no word yet of any scheme to replace the Help to Buy scheme from the government.
Who was it for?
Initially, Help to Buy was aimed at first time buyers. Providing they had a deposit of at least 5% of the purchase price, the scheme would grant them a loan for their deposit of up to 20% of the purchase price. The buyer would then have to take out a mortgage for the remaining amount. There were regional limits on the on the maximum property purchase price, in the North West you were able to buy a home up to and including £224,400.
The scheme was later changed and meant that the only type of property you could purchase via the scheme was a new build property.
How did it work?
If a property is bought using the Help to Buy scheme, for the first five years you do not have to make a payment and no interest is added to the loan. This means that you are only making payments on the mortgage that you took out. After 5 years, you have to start repaying the loan, and interest is added to the repayments. In the sixth year, you were charged interest at a rate of 1.75% on the Help to Buy portion of your loan. The interest will then rise every year in April, by adding the Consumer price Index (CPI) plus 2%. The interest payments decrease if you make part repayment of the equity loan because the amount the interest rate is applied to will reduce.
Buying back the Government share of the property is known as staircasing. Most people at this point will make a decision to either re-mortgage their property in order to pay back the government loan or sell the property and move.
Why do you need a RICS Help to Buy Valuation if you want to re-mortgage or sell your home?
In order to staircase and continue to live in the property or, sell and move house, the person who owns the property – the same person who took out the Help to Buy loan – must have an RICS valuation which can provide a current Market Value of the property. This is needed because the property owner cannot be seen to financially benefit from the scheme, and to ensure that the Government gets a return on their investment. If the property increases in value, so will the amount of loan that you have to pay back to the government. If the property cost £250,000 when you bought it and the government loan was 20% of that purchase price, then the government would have loaned you £50,000. If, when you come to staircase or sell the property has increased in value to £300,000 the government want 20% of the new valuation back, so the repayment would be £60,000. The rest of the increase could be used by you towards a new deposit if you are moving. This means that people could not participate simply to make money from the government’s support.
Professional & Independent Market Valuation
A professional and independent valuation by a RICS registered Help to Buy Valuation expert is therefore needed to ensure that there is a an accurate market valuation given before the home can be staircased or re-mortgaged. This means that the government will get an accurate return on their investment and the homeowner will know exactly what they should be selling their home for if this is what they want to do. At Avery & Co we carry out Help to Buy valuations that follow the exact requirements of the scheme and we send out one of our experienced and RICS qualified valuers to inspect the inside and outside of the property.
At Avery & Co Chartered Surveyors and Valuers we are able to guide you through the process of having an RICS Valuation if you are coming towards the end of your 5 year period and need to make a decision. We offer a Fixed Fee service for only £250 inc VAT for a RICS Help to Buy Valuation. Get in touch today and one of our friendly team will be happy to have a chat with you.
