Help To Buy Equity Loan | 7 Hacks To Help You Settle It

Introduction

Gemma:
Help to Buy is a great scheme that helps people get onto the property ladder. Thousands of people have used it so far. However, Help to Buy has to be settled at some point if you want to reap the full benefits.
Today, we’re going to be discussing seven hacks that could be helpful in settling Help to Buy.
Joining us again is Iftaka (“Ifthi”), a trained accountant, mortgage broker, and one of the founding directors here at WIS.

How does Help to Buy work?

Gemma: Can you start by explaining how Help to Buy works?
Ifthi:
With Help to Buy, a buyer needs only a 5% deposit.
The government provides 20% (in London, higher limits apply; outside, they’re lower).
Together, this forms a 25% deposit. The bank then lends the remaining 75%.
The scheme is restricted to new builds and only for first-time buyers (up to £600,000 in London).
Example:
Property value: £500,000
Buyer’s deposit: £25,000 (5%)
Government loan: £100,000 (20%)
Bank mortgage: £375,000 (75%)
The government loan is interest-free for the first 5 years. After that, interest is charged.
Important catch:
When you repay, the government takes 20% of the property’s current value, not the original loan amount.
Example: If the property rises to £550,000, repayment is £110,000 (20%), not the original £100,000.

Hack 1: Timing your settlement

Gemma: The first hack is about timing the settlement. Why is this important?
Ifthi:
Best time to settle is when the property’s value is at its lowest.
For example, if it’s still worth £500,000, repayment is £100,000. If it’s risen to £550,000, repayment is £110,000.
Property values often dip slightly after purchase, similar to buying a new car, so some clients settle early and benefit.
Other opportunities: during an economic downturn (e.g., Brexit years, when values dipped).
But: There’s no crystal ball—timing is uncertain.

Hack 2: Settling in the 4th or 5th year

Gemma: Why is the 4th or 5th year a common time to settle?
Ifthi:
By this time, buyers have usually paid down a good portion of their mortgage.
Example: Original mortgage £375,000 → after 4–5 years, you may have repaid £30,000, creating equity.
If the property is now £550,000, the government share is £110,000.
You can remortgage using built-up equity plus a new loan to repay Help to Buy.
This is realistic for most people, since few can save enough to settle earlier.

Hack 3: Settling while remortgaging

Gemma: Can settling while remortgaging save money?
Ifthi:
Yes, it’s often the best time:
You get a fresh product.
You avoid issues with early repayment charges or expensive second mortgages.
Solicitor costs may be covered (with only a small supplementary fee).
If you try to settle mid-deal, banks may not provide solicitors, meaning you pay higher fees. Remortgage time is usually cheaper and cleaner.

Hack 4: Valuation is key

Gemma: How important is valuation in the process?
Ifthi:
Extremely important. Government repayment is based on RICS-certified valuation only.
Bank or estate agent valuations do not count.
Typical cost: £250–£300.
Tip: Choose a local RICS valuer to avoid extra travel fees.
Why it matters:
Bank valuation: £550,000 → repayment £110,000.
RICS valuation: £500,000 → repayment £100,000.
That’s a £10,000 difference. Always rely on RICS.

Hack 5: Selecting the right mortgage product

Gemma: Why does the choice of mortgage product matter when settling Help to Buy?
Ifthi:
Most people will need a new mortgage when repaying Help to Buy.
After settlement, your loan-to-value (LTV) often increases above 75%, meaning higher rates.
A good broker can advise: sometimes even chipping in a small extra sum (e.g., £2,000) can move you into a lower LTV band with cheaper rates.
Bills are likely to rise, so getting the right product is crucial.

Hack 6: Timing your valuation

Gemma: What about the timing of the valuation?
Ifthi:
Valuation must be less than 3 months old at the time of settlement.
Common mistake: getting it done too early → application rejected → extra costs.
Best practice: Do the valuation about 2 months before settlement. This gives a buffer for delays.
Especially important if combining with a remortgage.

Hack 7: Get your admin right

Gemma: What admin issues should buyers be aware of?
Ifthi:
Settlement requires forms, valuation report, and a fee sent to Target (the agency managing Help to Buy).
If forms are incomplete or incorrect, it can cause delays.
Delays may lead to:
Extra interest payments to the bank or government
Problems with remortgage timing
Brokers often help with this paperwork—take advantage of their support.

Final Thoughts

Gemma:
Thanks, Ifthi—that’s some excellent advice.
Key reminder:
These hacks may not suit everyone. Always check with an advisor.
If you don’t have a broker, our WIS team is happy to help.
A mortgage is secured against your home or property and it may be repossessed if you do not keep up repayments.