The concept of home ownership is one that appeals to many. However, for numerous potential homeowners, taking that initial leap onto the property ladder can be a daunting experience, often hindered by the financial challenges involved in initial purchase. Enter the ‘Help to Buy’ scheme, an initiative designed to support those with limited resources in purchasing their first home. An essential part of this process is the ‘Help to Buy valuation’. This post will provide an in-depth understanding of what Help to Buy valuation is, why it’s important, and how it can aid in your home-buying journey.

What is Help to Buy?

Before diving into the valuation process, let’s first understand the Help to Buy scheme. Introduced in the UK, this government-backed initiative aims to support first-time home buyers and those looking to move up the property ladder. The scheme essentially offers an equity loan wherein the government lends up to a certain percentage of the home’s cost, and the buyer covers the remainder of valuation help to buy loan through a deposit and mortgage.

Why is Help to Buy Valuation Necessary?

When the time comes for homeowners to repay the equity loan, sell the property, or refinance their mortgage, a Help to Buy valuation becomes necessary. This valuation determines the current market value of the property, which in turn dictates the amount to be repaid on the equity loan. Given that property values fluctuate over time, it’s essential to ensure that the valuation costs and the repayment figure is accurate and reflective of the home’s present worth.

Key Elements of Help to Buy Valuation

1. RICS Regulation: A Help to Buy valuation must be carried out by a RICS (Royal Institution of Chartered Surveyors) regulated surveyor. This ensures that the valuation is unbiased, accurate, and conforms to the highest professional standards.
2. Market Comparison: The valuation process involves comparing the property in question with similar properties in the vicinity that have been sold recently. This comparative method ensures that the valuation reflects current market conditions.
3. Property’s Condition: Unlike basic online valuation tools, a physical inspection considers the property’s condition, any modifications, structural issues, or unique features that could influence its value.
4. Validity: A Help to Buy valuation typically remains valid for three months. If the property is not sold or the equity loan isn’t settled within this period, a new valuation might be necessary.

The Valuation Process

1. Choosing a RICS Surveyor: Start by finding a qualified RICS surveyor experienced in Help to Buy valuations. It’s advisable to obtain quotes and perhaps even seek recommendations to ensure you’re making an informed decision.
2. Property Inspection: The surveyor will schedule a visit to inspect the property, assessing its size, condition, location, and any other pertinent features.
3. Report Compilation: After the inspection, the surveyor will compile a detailed report. This document will outline the property’s current market value and provide justifications for the figure based on market comparisons and other relevant data.
4. Loan Repayment or Sale: With the valuation report in hand, homeowners can proceed to repay the equity loan based on the stipulated amount or list their property for sale.

Benefits of a Thorough Valuation

1. Accurate Loan Repayment: A precise valuation ensures that homeowners repay a fair amount, reflective of their property’s current worth.
2. Confidence in Selling: Those wishing to sell can set a competitive and realistic price, maximizing their chances of attracting potential buyers.
3. Refinancing Clarity: Homeowners looking to refinance their mortgage will have a clear understanding of their property’s equity, assisting them in securing the best possible mortgage terms.

Equity Loan

An equity loan is a type of loan in which the borrower uses the equity of their property as collateral. The equity of a home is determined by taking the current market value of the property and subtracting any outstanding mortgage or other liens against the property type from it estimated market value.

Types of Equity Loans:

There are primarily two kinds of equity loans:

• Home Equity Loans: Often referred to as a second mortgage, a home equity loan provides a lump sum to the borrower, which is repaid over a set term, typically 5 to 15 years. The interest rate can be fixed or variable.
• Home Equity Line of Credit (HELOC): This is more like a credit card, where you have a revolving line of credit up to a certain amount and can borrow against it as you wish. HELOCs often come with variable interest rates.

Valuation Report

A valuation report is a document that describes the process and findings of an assessment of a property’s value. This report can be related to real estate property, business entities, or assets. The goal is to provide a detailed, understandable, and transparent account of the valuation method, the data used, the market conditions, and other factors leading to the determination of the asset’s value.

Importance of a Valuation Report

• Transparency: A detailed report offers clarity to all parties involved (buyers, sellers, lenders, etc.) about how the value was determined.
• Decision Making: It aids stakeholders in making informed decisions regarding buying, selling, or investing.
• Financing: Lenders often require a professional valuation report before approving a mortgage or other types of loans.
• Legal and Tax Purposes: The report can be used for legal proceedings, insurance claims, or tax-related matters.

Buy Valuation Report

Purchasing a valuation report is an investment in informed decision-making. Whether you’re buying, selling, or merely seeking clarity about an asset’s worth, a detailed and professionally done valuation report can offer invaluable insights. Always ensure you choose a reputable valuer and understand the intricacies of the report to make the most of it.

RICS Valuation Report

The Royal Institution of Chartered Surveyors (RICS) is a professional body that promotes and enforces the highest international standards in the valuation, management, and development of land, real estate, construction, and infrastructure. When you get a RICS valuation report, you’re getting a document that adheres to internationally recognized standards.

Comprehensive Detail

A RICS valuation report typically includes:

• Purpose and Scope of the Valuation: Clearly outlining the reason for the valuation and the intended use of the report.
• Methodology: An explanation of the valuation method used, whether it’s a market comparison approach, income approach, or cost approach.
• Property Details: A comprehensive description of the property, including its age, size, condition, location, and any unique features.
• Market Analysis: Information on current market conditions, local property trends, and other relevant data.
• Valuation Date: The specific date on which the valuation is applicable.
• Limiting Conditions: Any assumptions, restrictions, or special conditions that apply to the valuation.
• Final Valued Amount: The estimated value of the property.

Mortgage Lender

A mortgage lender is an entity, a bank or mortgage purposes, often a bank or financial institution, that provides financing for the purchase of real estate. When a borrower receives a loan from a mortgage lender, the property usually serves as collateral for that loan. If the borrower defaults on their payments, the lender may take possession of the property through a legal process known as foreclosure.

What is a Help to Buy Valuation?

A Help to buy loan, to Buy Valuation determines the amount repayable on a Help to Buy Equity Loan. This is in proportion to the current market value.

The valuation consists of a physical inspection of the home and market research. This is to determine the value of the property and is completed by a RICS-registered valuer. A Help to Buy Valuation is necessary when you want to sell, remortgage or help to buy valuations more shares of your HTB home.

What is Help to Buy?

Help to Buy (HTB) is the name of a set of government schemes designed to help first-time buyers achieve home ownership. These include the Help to Buy ISA, Shared Ownership and the Help to Buy: Equity Loan Scheme.

When Do I Need a Help to Buy Valuation?

You will need a Help to Buy Valuation when you sell your home, are remortgaging re mortgage or repaying the loan.

Target HCA, appointed by the Homes and Communities Agency to administer the Help to Buy Equity Loan scheme, require a valuation from a RICS-registered valuer:

• When you are selling the home
• When you remortgage
• If you are “staircasing” (buying more shares of your home)
• If you are paying off the loan in full

The buy valuation report is valid for 3 months from the date it is produced. According to the government website, it must be sent to government administrators within 5 working days of being issued.

Finding a RICS Registered Valuer

To meet the requirements of Target HCA, the valuer you opt for must be qualified and RICS registered. They should also be independent and not connected to any estate agent and not be known to or related to you.

Compare My Move can match you with up to 6 local RICS registered surveyors who offer valuations among their services. These surveyors will not only have exceptional market knowledge, but they will also have local knowledge of the area of the home. Our Sales and Partner Support Teams work hard to ensure we only take on the best in the business. All surveyors and valuers must be RICS registered before joining our network.

When to get a Help to Buy Valuation?

First introduced in 2013, Help to Buy is a government programme that aims to help first-time buyers and those looking to move home to buy a property. Although it features several initiatives, key elements of Help to Buy are the equity loan scheme which helped many buyers afford their home and which has to be paid back when the property is sold.

As a Help to Buy owner, you’ll be required to get a Help to Buy valuation when you sell or remortgage. Doing this at the right time and choosing the right valuer could significantly impact the agreed sale price, so what should you take into account when selling a Help to Buy home?

What is the Help to Buy equity loan scheme?

The Help to Buy equity loan scheme was available for new-build homes valued at less than £600,000 in England and £300,000 in Wales. The scheme closed to new applications on 31 October 2022, and purchases must be completed by 23 March.

As part of the scheme, when purchasing a qualifying property, the government would provide an equity loan for up to 20% of its value (40% within London) if the buyer could provide at least a 5% deposit. A mortgage from a commercial lender would be needed to cover the rest of the property’s asking price. The aim was to provide a way for those struggling to buy a home to get a foot on the property ladder.

The Help to Buy scheme has undeniably paved the way for numerous individuals to realize their dreams of homeownership. The help to buy equity and associated valuation process, while seemingly complex, is integral to ensuring fairness and accuracy in the property market. Whether you’re gearing up to step onto the property ladder, considering selling, or simply curious about your home’s current value, a Help to Buy property valuation offers clarity and peace of mind. Remember to always seek professional guidance and ensure that your chosen surveyor is both experienced and RICS-regulated. With the right support, the path to homeownership, and subsequent navigation, becomes a journey well worth embarking on.

You can find more information on our website, Andrew Pridell Associates