Help to buy loan redemption rules/options

homemover001

Hi MSE forum,

I purchased a home on the Help to Buy scheme several years ago, and am now in the process of selling, currently Sold STC.

I am in a fortunate position whereby I have the funds to pay off the help to buy loan in full.

Furthermore, our agreed sale price exceeds the RICS valuation we have received, by a meaningful amount.

I understand that redeeming the loan upon completion will see us pay back an equivalent proportion of the final sale price, as it is the higher of the two values (Valuation vs Sales price).

My question is this: in this position, is it possible/allowed to pay off the loan before Exchange, based on the lower valuation provided by the RICS surveyor? Doing so would represent a 5 figure saving in this scenario.

Any guidance would be fantastic, I’ve been unable to find any information online explaining this specific scenario.

Thank you.

silvercar

Full guidance here:

https://www.gov.uk/guidance/how-to-repay-your-equity-loan-using-your-own-money#how-much-you-need-to-repay

Your problem may be the need [for the surveyor] to provide details of 3 comparable properties for sale. The valuation has to look at comparables as well as a paper exercise valuation, but there is certainly no harm in going down this route. I suspect that ideally the time to buy out the HTB was before you started marketing your property.

Tiglet2

Having the HTB equity loan means that there is a registered charge against your title from the Homes & Communities Agency and this needs to be removed from the title.  Usually that's done on completion, but paying the loan off early would mean that the HTB loan would need to be settled (and removed from the title) before you can exchange.

It would probably cause a delay while this separate transaction is completed before moving forward on your sale.

This would be additional work for the solicitor and they may raise their fees to reflect it.

Land Registry have a large backlog of work to catch up on so there may be delays while you wait for the changes to be made.  Your solicitor may be able to expedite the application, as there is a related sale transaction, but your buyers may not be very patient.

As Silvercar said above, you might have been better to have paid off the HTB loan before marketing the property for sale.

homemover001

Thanks both, that’s helpful information.

Agreed on the point re: redeeming before marketing the property, however I had concerns at the time of saleability given recent property market events, therefore didn’t want to risk redeeming the loan at a higher value than I may have been able to sell the property for.

Exchange is due by end of January, so I suspect the likelihood of being able to process a redemption ahead of this is unlikely. 

silvercar

Timescales aside, the question is whether the HTB redeemers will be satisfied with the RICS valuation given "Furthermore, our agreed sale price exceeds the RICS valuation we have received, by a meaningful amount." They will want the surveyor to look at comparables. Unless your buyers are paying higher than local market value by a significant amount, I don't understand how this will work. If they are paying more, then why?