Help to Buy schemes have been around for a number of years. These allow you to put down a reduced deposit, generally 5%. And also receive a contribution toward the cost of the property from another party. E.g. the developer, who takes a second charge over the Property.
The percentage of the contribution varies depending on the scheme used as does the repayment obligations.
The most common scheme is the Government’s first Help to Buy equity loan. That provides a 20% contribution toward the cost of a new build home.
How to qualify
In order to qualify for the Help to Buy equity loan you must:-
- Purchase a new build property
- Up to a maximum value of £600,000
- At the end of the day of completion this must be your only home. This means that it is available to both first time buyers and those looking to move home. Provided that they are selling their current property (or properties).
The Government’s Help to Buy website makes it clear that you will not be able to enter into a part exchange with your current property to purchase the new home. You will also not be permitted to sublet the home you purchase until the Help to Buy equity loan has been paid off. Subject to any conditions on subletting contained within the legal title to the home.
Points to note
When you apply, it will be through your local Help to Buy Agent. This again can be found on the Government’s Help to Buy website. Once the application process is complete, your solicitor will be sent a pack containing an Authority to Proceed. This is valid for three months and you should exchange within this time. It is possible to have the Authority to Proceed extended but this is not guaranteed.
As the purchase will be a new build this should not be an issue. Most developers require that exchange takes place within 28 days of the contracts being issued. If you are purely purchasing, this is often not an issue. Provided the developer actually has the paperwork in place which is not always the case. Where you are also tying in a sale, however, particularly if that sale is complicated, then there can be difficulties with the timeframe.
There are two main issues with a delayed exchange:-
- The Authority to Proceed may expire
- Pressure from the developer. Developers are keen to lock you in to their purchases as soon as possible. The site office often ring and chase and will make it sound as though the developer is going to withdraw the home from you. This is particularly relevant when you are a first time buyer. They will make it sound as though the developer is on the verge of withdrawing and that you are going to lose the home. Whilst this does happen on occasion it is rather rare. In a lot of cases the delay is either on the developer’s part because the appropriate paperwork is not in place. Or further down the chain which is not within your control in any event. We understand this is a particularly stressful time. That you would not find it helpful to have an over zealous site office making it seem the whole transaction is about to fall apart. Just because you have not yet exchanged, even when the developer’s legal team has probably not even issued papers.
There are additional requirements that your solicitor will have to fulfil when acting on a matter involving a Help to Buy equity loan. These include:-
- Reporting to you on the terms of the loan and ensuring you have signed this correctly.
- Report the existence of the equity loan to your lender and receiving from them confirmation that they will not issue you with any further borrowing without the consent of the Help to Buy agency.
- Request specific authority to exchange. This is an administrative step whereby the solicitor has to notify Help to Buy of the expected exchange timescale and receive authority to exchange
- Post exchange, there are a number of forms which need to be sent to Help to Buy to request draw down of the contribution. There is a minimum period of five working days for this
- Post completion, there are additional requirements which your solicitor will need to undertake to satisfy the requirements of Help to Buy. One of which is to send a copy of the title to the home once this has been registered. Most new build properties take a significant time to register with the Land Registry. It is usually many months before this is completed
When you move or if you simply want to repay your Help to Buy equity loan you will need to undertake a valuation survey by a RICS qualified surveyor. Who will produce a report showing the current market value of the Property.
This is then submitted to Target (this is the name of the company at the time of writing. It has previously been to the Homes and Communities Agency) together with an administration fee and details of your solicitor. Target will then write to your solicitor with confirmation that they accept the valuation and a breakdown of the lump sum payable in respect of redemption of the Help to Buy equity loan.
The valuation only lasts for three months and Target require 15 working days notice of redemption. They may not be able to provide the solicitor with the paperwork in order to redeem the loan at short notice. Although they will always try to accommodate any urgent sales and offer a helpful telephone advice service. It is, therefore, always advisable to ensure that your funding is in place when you submit the redemption application and valuation to Target. It is also imperative that you submit the valuation to Target as soon as it has been done to avoid this expiring.
When you are moving home the redemption of a Help to Buy equity loan can cause additional difficulties. It is often hard to judge how quickly a chain will progress. The more people that are involved in a chain the harder it is. The need to balance being able to provide Target with sufficient notice and leaving enough time to ensure the valuation does not expire can be tricky.
How we can help
The Help to Buy schemes can offer access to the property ladder. Given the nature of the requirements and the conditions in respect of the home you must purchase. However, the purchase process, especially for first time buyers can be rather stressful. So it is important you instruct a solicitor with prior experience of the schemes. Each Help to Buy regional area has a website, giving useful information. It should also have a list of solicitors in each county who can help you. We are the only solicitor on that list for Sussex. Our aim is to reduce the stresses of the move by being open with you throughout the process as to the realistic time it will take to conclude matters. We are more than happy to speak to site offices directly during the process. Both to keep them in the loop in respect of where we are and in particular if we are missing paperwork from the developer or their solicitor.
To contact our property team regarding Help to Buy, please complete the contact form below.
Please note, this article does not constitute legal advice and its content may be subject to modification depending on any changes in the law.