Help to Buy Repayment

tomasn88

My partner and I bought a home in July 2016 using the Help to Buy equity scheme,we are fortunate enough to be in a position to pay it off but I have a concern to which I can't find an answer online?

When our fixed rate mortgage comes to an end of this time, it's likely we will want to remortgage and so we understand the help to Buy will have to be paid off by then which is why I am looking to pay it off now. I can't see this being our 'forever home' but we do plan on staying in it for around 10-15 years, so it's not an option to wait until we are ready to sell, and pay it off then.

The concern I have is that to pay back the Help to Buy, the house has to be valued. As we bought the house off plan, we spend £8,000 on extras which weren't included in the sale price therefore not included in the Help to Buy loan. Since buying the house, we have also had a full new bathroom (wall mounted sink, wall mounted toilet, Jacuzzi spa bath, rainfall shower, tiling and waterproof TV), total garden refurbishment, large garden shed with workshop and a kitchen upgrade. These improvements have cost us in the region of £20,000 which in turn will increase the property value. I don't feel like we should owe the Help to Buy scheme 20% of the final valuation as the valuation isn't just purely due to house price inflation as improvements have been made so would it be fair to say that the £28,000 we have spent should be deducted from the final valuation?

I'm quite confused about how this process works and really don't know the best way to go about finding out this information. Any advice would be greatly appreciated!

amnblog

You will pay them back 20% of the new valuation.

That's it.

sal_III

The fact that you spend £8k on extras and another £20k of improvements in the first 2 years of buying a new home doesn't change the fact that you owe the HTB agency 20% of the valuation at time of repayment. It was your choice.

You opted to take advantage of a product designed for people who struggle to get a deposit (and property developers but that's another story) and not for people who have enough disposable income to splash £28k on extras like Jacuzzi and bathroom TVs in the first 2 years of buying a property and now you are paying the price.

The process works in the way that you need an up-to-date rics valuation on which basis you make the repayment of the equity loan in increments of 10% of the property value specified in said valuation. Plain and simple.

tomasn88

At the time of purchase, we had a 5% deposit plus an extra £8000. We decided to pay the 5% deposit and use the £8000 for extras as the house came very basic (no outside tap etc). I have since had a promotion and my partner has since had a new job meaning we are now financially in a much better position. I wouldn’t say we took advantage of the scheme because at the time of purchase we were in a very different position to now.

However, the current valuation doesn’t reflect the standard of property when it wasn’t purchased and surely that should be taken in to consideration.

kingstreet

Home improvements as they are viewed by the post-sales HTB Agent, to whom you should have enquired before embarking on your programme;-

https://www.myfirsthome.org.uk/iwantto/conduct-home-improvements/

sal_III

tomasn88 wrote: »

However, the current valuation doesn’t reflect the standard of property when it wasn’t purchased and surely that should be taken in to consideration.

Whether the increase of the property valuation was caused by improvements made by you or market forces is irrelevant. The terms of the HTB equity loan are plain and clear and you signed on the dotted line.

kingstreet

tomasn88 wrote: »

When our fixed rate mortgage comes to an end of this time, it's likely we will want to remortgage

Do you mean remortgage (a new mortgage with a new lender to repay the old one) or ask existing lender for a customer retention product?

Either way, it is possible to remortgage to a new lender and repay the equity loan, or leave the equity loan in-situ if you prefer, although there are fewer options for the latter.

so we understand the help to Buy will have to be paid off by then

Not the case.

The concern I have is that to pay back the Help to Buy, the house has to be valued.

Yes. An independent chartered surveyor of your choice should be instructed.

As we bought the house off plan, we spend £8,000 on extras which weren't included in the sale price therefore not included in the Help to Buy loan. Since buying the house, we have also had a full new bathroom (wall mounted sink, wall mounted toilet, Jacuzzi spa bath, rainfall shower, tiling and waterproof TV), total garden refurbishment, large garden shed with workshop and a kitchen upgrade. These improvements have cost us in the region of £20,000 which in turn will increase the property value.

Maybe, maybe not.

It's always tough to call on what helps to sell and what adds value.

I don't feel like we should owe the Help to Buy scheme 20% of the final valuation as the valuation isn't just purely due to house price inflation as improvements have been made so would it be fair to say that the £28,000 we have spent should be deducted from the final valuation?

Unfortunately, it doesn't work like that.

I'm quite confused about how this process works and really don't know the best way to go about finding out this information. Any advice would be greatly appreciated!

The post-sales HTB Agent's website I linked to earlier which is referred to in the HTB Buyers Guide and the correspondence you will have received from your Area HTB Agent earlier.