Help to Buy if prices fall

chillcoat

I have a HTB equity loan on a house bought last year.

The documentation is all quite clear on what happens if prices rise - you repay 20% of the prevailing value at the time you repay / sell the house.

What it's less clear on is what happens if prices fall. You'd imagine that the reverse would be the case - you repay 20% of the house value at the time. But the HTB website myfirsthome.org.uk indicates something else - that you'd repay the difference between your outstanding mortgage and the house value, which could be a number as low as £0. See this quote:

Provided the market valuation you supplied is approved and you have met all the terms of your loan the Lender, will accept a reduced repayment. The amount is calculated by subtracting the outstanding balance on your main mortgage (excluding early redemption penalties) from the sale price or the market value of your property (whichever is higher). We will liaise directly with your solicitor to ensure the correct amount is repaid.

I've tried to find more info on this online but cannot see anything. But if prices are on their way down (as I believe they are) then this will become more of an issue for lots of people like me. And not necessarily in a bad way! If I've hedged against falling house prices then that might be quite handy for me; albeit that I'd lose the 5% deposit I put down to buy the house.

Does anyone have more info on this, or could point me in the right direction? Many thanks.

Crashy_Time

Could work out well for you, everyone and their dog is shouting "Crash" now.


http://www.standard.co.uk/business/virgin-money-in-london-house-prices-warning-a3595456.html

DaftyDuck

Sigh. Neither I, nor my dog are even whispering it

http://www.independent.co.uk/news/business/news/uk-house-prices-latest-increase-7-per-cent-brexit-income-squeeze-housing-market-a7851516.html

Crashy_Time

DaftyDuck wrote: »

Sigh. Neither I, nor my dog are even whispering it

http://www.independent.co.uk/news/business/news/uk-house-prices-latest-increase-7-per-cent-brexit-income-squeeze-housing-market-a7851516.html

That`s just you and your dog though, maybe you don`t want property prices to get cheaper for some reason If you want to believe that the negative outlook that has suddenly sprung up in the media regarding property prices is having no effect on sentiment that is up to you, ignoring it doesn`t sound like a good bet to me though, especially for people on the cusp of signing up to shedloads of mortgage debt.

hammy1988

In my HTB application, it said it was 20% of the sale price or remortgage price, whether that be it falls or rises, it is 20%.

Crashy_Time

More whispers...

http://www.thisismoney.co.uk/money/markets/article-4735006/Torrid-day-UK-s-largest-estate-agents.html

Thrugelmir

The official line.

What happens if property values fall?

Will I have to repay the full amount of Help to Buy assistance or just a percentage of the total sale proceeds?

When you sell your home, (unless you have repaid the Help to Buy equity loan document previously) the Help to Buy equity loan document commits you to repay a percentage of the market value equal to the percentage contribution of assistance received.

This means if the market value of your property falls below the level at which it was first purchased, you will repay less than the original amount the Agency contributed to the original purchase.

You must always show that the proposed sale value is at the prevailing market value before going ahead. The Agency’s Mortgage Administrator must approve the sale before allowing the second charge to be released.

As long as you have complied with all your obligations in the Help to Buy mortgage deed, you will not be required to provide for any shortfall in the equity loan repayment if you sell when values have fallen.

If you do not comply with the terms of the Help to Buy mortgage deed, the Agency will seek to recover all the money they are owed. Your solicitor will explain the Help to Buy mortgage deed to you before the property is purchased.

Crashy_Time

Thrugelmir wrote: »

The official line.

"Obligations" being things like not renting it out etc.?