How to redeem a Help to Buy equity loan when you sell your property
Completing on the purchase of a property with a Help to Buy Equity Loan does not mean you are free from all the additional paperwork involved. A Help to Buy Equity Loan will need to be redeemed on the sale of a property, just like any other mortgage or personal loan, which has been secured. These loans are now administrated by Target.
Although your solicitor can advise you on the process, this article gives a brief overview of the steps involved, which if not initiated promptly, could delay your sale.
You will firstly need to arrange a valuation of your property. In line with the Help to Buy requirements (which can be found at here) this needs to be carried out by a RICS surveyor. You as the seller will be responsible for this cost and should be aware that the valuation report will only be valid for three months. If your sale has not completed by the expiry date, a further desktop valuation will be required.
You will also need to complete the relevant loan redemption form and pay an administration fee. If you are redeeming the charge via the sale of your property you will need to complete ‘Form A’ and the administration fee will depend on the type of loan you have. Target will confirm the exact fee and you will need to make the payment direct to them.
Once Target have received the above, a redemption letter and guidance pack will then be produced and sent to your solicitor. This will show the outstanding balance of your loan which is calculated based on the sale price and RICS valuation report.
Your solicitor should check the figure with you and check whether you are aware of any arrears that will need to be repaid. Your solicitor will also need to ensure that there will be sufficient funds from the sale proceeds for the loan to be repaid. Remember you will likely also have a normal mortgage to repay in full on completion, as well as legal fees and any third-party costs.
If you are happy that the outstanding balance is correct your solicitor will then send a letter of undertaking to Target which confirms that the balance will be repaid on completion of your sale. This should ideally be sent via email 15 working days prior to the anticipated completion date.
You will then need to wait for what is called ‘Authority to Complete’ to be received from Target before your solicitor is legally entitled to finalise your sale; this can take up to five working days from receipt of the letter of undertaking to be received.
Once received your sale can proceed to completion and your solicitor will deal with the transfer of funds. Target will deal with the removal of their charge at Land Registry.
If you are thinking of selling or buying a property with a Help to Buy (HTB) Loan, please contact our highly experienced residential conveyancing team at Askews Legal LLP in Coventry. Or try out our conveyancing calculator for a free, no obligation conveyancing quote.
