What to Know About Reselling Homes Purchased with Help to Buy Mortgages

  • Added:
    Nov 10, 2013
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Houses for sale
Houses for sale
Photo by I See Modern Britain

The Help to Buy program for UK mortgages may be able to help you get into your first new home. With the low required cash deposit and home equity loan, you can find a mortgage that is within your means and finally be on the road to homeownership. You may be wondering what happens when you sell a home that was purchased under the Help to Buy program. The good news, is that in many cases you can sell your home quite normally with no special considerations. If you take out a home equity loan, however, there are a few rules that you will want to be familiar with when it comes time to sell. If you stay in your property long enough to pay it off before it's sold, you will pay off your home equity loan at the same time as your mortgage is paid in full.

Right to Sell

When you use the Help to Buy program to purchase a home, the property is in your name, even when you use a government home equity loan to help you complete the sale. This gives you the right to sell your home at any time. Unlike some assistance programs, which might ask you to commit to living in your home for a certain number of months, Help to Buy doesn't require it. However, if you take out a home equity loan to help purchase the property you must pay the loan back immediately upon the sale of your home.

Home Equity Loan Implications

Your home equity loan can equal as much as 20 percent of the value of your home. When you sell the home, you will owe  20 percent of the home's current value as repayment of the loan. For instance, if you purchase a home with a value of 100,000 pounds, your home equity loan will be in the amount of 20,000 pounds. If, when you sell the property, the value is 200,000, you must repay 40,000 pounds to satisfy the loan repayment as outlined in Help to Buy rules. In some cases, you may be able to repay a portion of the loan while you're still living in the home and before the mortgage term is up. Contact your local Help to Buy agent to learn more.

Mortgage Repayment

When you sell your home, you are responsible for repaying the remaining amount on your mortgage after you pay back the home equity loan. If you don't make enough profit from the home to repay the mortgage in full, you can either ask for a short sale on the property or use your personal savings to pay back the remainder of the loan.

Talking to Your Agent

You will work with an agent in your area to apply for the Help to Buy program. Your agent will notify you when you start to incur fees on a home equity loan, and help you set up a bank account to begin paying back the loan when the time comes. If you don't take out a government home equity loan as a part of your Help to Buy mortgage, then you won't need an agent to help you arrange loan repayment, since your only loan will be from your traditional lender.

Considerations

If you use the Help to Buy scheme to purchase a home, you can't sublet the home. There are also other various restrictions, such as a limit on the home's initial value of 600,000 pounds. You can resell your home for more than this amount, but the original loans and cash deposit can't add exceed 600,000 pounds.

Help to Buy is opening up mortgages to new homeowners across Britain, and the new owners will have full rights to their new property - even with a government home equity loan. If you have an equity loan, the most important thing to remember is that the amount owed for repayment varies with the value of your home. If you sell your home during a period in which the value has increased significantly, you will end up repaying more for your loan than you initially borrowed, even though there is little interest assessed on the loan.

Author's Profile

Author Sam Jones recommends uSwitch for further reading on help to buy and other mortgage products


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