Help to Buy scheme Valuations
Are you looking at paying back the government, to increase your equity stake in your home? Possibly buying the government or its partners out completely? If so, you’ll need a valuation to determine the Market Value of the stake you want to buy. This Valuation needs to be compliant with the RICS Red Book and undertaken by an RICS Registered Valuer, of which we have a number at Websters Surveyors and can help.
With interest payable upon loans after the first five years and mortgage borrowing being around the cheapest it has ever been, we’re finding lots of homeowners are choosing to pay a mortgage rather than the government or its partners interest. The cost can be similar but with a mortgage, at least you are buying more of the property so it is in your ownership.
Equity loans are part of the government’s Help to Buy scheme which is only available for first-time buyers and on eligible new build homes. The scheme requires individuals to only need a 5% deposit of the purchase price and the rest of the purchase price comes from a combination of a mortgage, and a government loan of up to 40% for London properties or 20% outside London.
The scheme enables applicants choose from a wider range of mortgage rates because your loan-to-value ratio is lower. However, the loan is interest free for 5 years and then you are charged 1.75% of the loan amount per year. Each year, this increases by the retail price index which is a measure of inflation.
As the Help to Buy equity loans are for a percentage of the property value, rather than a set cash amount. This means you could end up paying back more or less than you borrowed, depending on whether your home rises or falls in value.
Shared Ownership Valuation
Shared Ownership is another product of the Government Help to Buy scheme. The scheme is for eligible individuals to who can’t afford a 100% mortgage of a home to buy a share of a new build or resale property. The shares are usually between 25% and 75% of the home’s value and the homeowner pays rent on the remaining share.
If you are a leaseholder of a Shared Ownership property and want to buy further shares in your property. This process is known as staircasing, this process enables you to own a greater proportion of your home. The greater the share you buy of your home, the less rent you will have to pay to the housing association and If you staircase to 100% you become an outright owner and pay no rent.
As the other share in the equity is owned by a public body, it is a requirement for the Valuation Report to be produced by an independent RICS Registered Valuer.
Currently, the Help to Buy scheme is administered by a company called Target who have specified requirements in what they consider is acceptable Valuation practice. This is catching a few firms out but due to our awareness of their requirements, our reports will be compliant. For example, they used to accept a minimum of three comparables but this recently changed to six, unless there is good justification why that is not possible. The comparables must be like for life in terms of type, age and size and the report must be addressed to Homes England.
What are the benefits of staircasing?
There are many benefits in staircasing, in our opinion there are Three main benefits these are:
• Reduced Rent - by reducing the percentage of your property that you rent from your local housing association you will also cut your monthly rent.
• Increase in value - The more of your home that you own the greater you’ll benefit if its value increases.
• Mortgage Choices – If you staircase your way to owning 100% of your home you’ll be eligible to get a standard mortgage which tend to be cheaper, rather than a mortgage suitable for shared ownership
• Control - If you own your property outright (becoming a 100% owner) you are not under restrictions from another party owning a share
Once instructed to carry out a Valuation, we are normally able to provide our report within a week and can often, if necessary meet tighter deadlines where required. Larger portfolios may of course take longer but we will discuss implications with you at an early stage.
At Websters, we are Chartered Surveyors, regulated by the Royal Institution of Chartered Surveyors. Our services span most of London and some surrounding areas including Hertfordshire, Buckinghamshire, Essex and parts of Surrey and Sussex.
Please contact us if you would like to discuss your requirements on 020 8017 1943.