Help to Buy Staircasing: Pay off your Equity Loan
Key Takeaways
- Help to Buy Staircasing is when you opt to pay off part of your Help to Buy Equity Loan. This is different to shared ownership staircasing.
- Repaying some of your equity loan, like repaying some of your mortgage, increases the equity you own in your home, reducing your debt and liabilities, and can in turn reduce your monthly payments.
- However, you have to weigh up whether it is worth your while to do so, particularly if you are going to use another mortgage loan for the purpose, because of the way that Help to Buy equity loans differ from standard mortgages.
What are the requirements to Staircase a Help to Buy Equity Loan?
- The minimum amount you can staircase at one time is 10% (of the total market value of the property at the time you staircase);
- The above requirement means that when the lenders’ equity in your property is less than 20%, you can only repay the loan in full;
- You may only staircase in multiples of 10%, that is 10%, 20%, 30% etc; and
- You cannot staircase if there are any arrears of interest payments and/or management fees on your mortgage account. Any arrears must be cleared before a staircase transaction can proceed.
What is the Staircasing Process?
- 1Mortgage Valuation Obtain a RICS Valuation.
- 2Application Submit your Help to Buy Application Form, including your RICS valuation and pay your admin fee.
- 3Provide your ID & source of funds.
- 4Source of Funds Certificate Your Solicitor reviews the source of refunds within 5 working days and often requests further evidence. Once satisfied, the solicitor submits a Certificate of Source of Funds to Help to Buy, within 3 working days.
- 5Redemption Statement Help to Buy issue a Redemption Statement within 10 to 15 working days - faster if you chase them. If your valuation isn't approved, they will contact you and may also wish to speak to your RICS valuation surveyor. This may result in a revised market valuation.
- 6Completion Statement Your solicitor prepares the file for completion and sends their legal undertaking to Help to Buy, requesting their Authority to Complete.
- 7Payment At this stage, you transfer the full amount for the loan repayment into the solicitor's account, who will hold it until completion day.
- 8Authority to Complete Help to Buy reply after 15 working days - faster if you chase them.
- 9Completion Your solicitor pays in the completion monies. A memorandum of staircasing is issued confirming the amount remaining on the Help to Buy equity loan.
What if completion is delayed?
If the completion date stated on the legal undertaking doesn't take place and is delayed by more than one week, your solicitor has to issue a new undertaking.
Are you ready to repay some of your equity loan?
Our panel of RICS Surveyors and Help to Buy Staircasing solicitors can handle the process from start to finish. Get a free call back to discuss your needs and get a tailored quote:
Two ways you can Staircase your Help to Buy Loan
You either opt to pay for your staircasing:
a) With a lump sum
Usually a gift, inheritance, or savings. You simply follow the procedure outlined in sections 1 and 2 above.
b) With another loan secured on your property
In this scenario, when you liaise with the Help to Buy Administrator, they provide a Guidance Pack to your solicitor, who processes the Deed of Postponement document required by your main mortgage lender for this transaction. The Deed of Postponement ensures your lender is ranked as the first charge on your home.
The amount of other-lender borrowing permitted is restricted to the amount you must pay for your staircasing transaction. For example, if you are looking to staircase 10% and your property is worth £200,000, you will need to pay £20,000. In this example, the further borrowing you can take out is restricted to £20,000 – you may not exceed this amount.
Homes England cannot confirm the exact amount of alternate borrowing you can obtain until they have the required information. You should not arrange alternate borrowing before they send you confirmation of the amount you can borrow. However, you may contact your lender to ensure you can obtain the amount you estimate that you will require.
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.
