Selling Help to Buy home equity loss

smallbusiness

I was hoping someone would be able to shed some light on this.

I'm considering enrolling in a Help to Buy scheme, I project I should be able to buy in the next 2 years. However, what has me hesitating is that I heard that if I wanted to sell it later on I would need to give the government back a percentage of the future equity (i.e. increase in value of the property) of at least 25% of the increase/profit. Is this true?

e.g.

Cost of home - £200,000

Cost name Percentage of total £ value
My deposit 5% £10,000
Equity loan 20% £40,000
Mortgage 75% £150,000
TOTAL £200,000

Home bought for £200,000 as above, sold for £250,000...

Increase in value: 25%
Equity loan repayment: £50,000 (£40,000 + 25% profit)
Mortgage £150,000 (less capital repayments)
Your share at least £50,000

alex_163163

Yes I think your maths is correct, although the way you've worded it is different to how it's usually explained.
When you sell the property on, you pay back 20% of the price you sell at.
Conversely if the property decreases in value, you would only pay back 20% of that selling price too.

To confirm this, you have to arrange and pay for an independent surveyor to come and value the property. The report they then write is sent to the HTB company as proof of its value.

TBagpuss

Think of it as HTB effectively owning a chunk of the house. If they lend you 20% of the purchase price, they get 20% of the sale price.

So: Buy at £200K with 20% HTB loan they invest 20% = £40K
Sell at £250K repay 20% =£50K

But on those figures, you have a total gain of £50K, £10 of it belongs to HTB, the other £40K is your gain.

You would then have £45K + the amount you'd reduced the mortgage by, less costs of sale, to use as your deposit on the next property.

KRB2725

I don't know how it works but on the assumption that you are correct and using your figures, 25% of the £50K increase would be £12,500, therefore you would pay back 40,000 + 12,500.

If however you pay back 20% of whatever the current market value is then using your figures it would be £50,000 that you pay back.

ETA was typing at the same time as above poster. They have cleared it up!