Is Your Help to Buy Valuation Too High?

Are you about to repay your Help to Buy Loan. Is your Help to Buy Valuation too high? You aren't alone...

At the end of the 5 years of help to buy, you either need to start paying interest or repay your loan. In this insight, we will explore the implications of a higher-than-expected valuation, the reasons behind it, and what you can do if you find yourself in this situation.

Key Takeaways

• Consider getting a second opinion from a different RICS surveyor if your Help to Buy valuation is too high.
• Aim for a lower valuation without damaging the property if you plan to repay your Help to Buy loan and not sell the property.
• A high valuation can lead to increased repayment amounts, difficulties selling the property, and challenges in mortgage applications, impacting your financial plans.
• Review the valuation report, seek a second opinion, negotiate with the government using evidence, and reassess your options if you find your Help to Buy valuation too high.

Is Your Help to Buy Valuation Too High?

If have found your Help to Buy valuation too high, your main option is to get a second opinion from a different RICS surveyor. If you get the chance to say hello to your surveyor, you may want to explain the valuation is for help to buy purposes.

Worth a go, I suppose.

If you have considered your help to buy after 5 years options, and If you have no plans to sell, but you want to simply repay your help to buy loan, the aim of the game is to achieve a low valuation. Without trashing your property, consider how you may do that. However, be aware, the help to buy valuation is an independent assessment of your property for a reason.

Here is an example of how the valuation can make a difference:

• Suppose you purchased a property using the Help to Buy scheme, which provided you with a 20% equity loan on the property's value. Let's assume the property was valued at £250,000, and you took a Help to Buy loan of 20% (£50,000).
• To clear the Help to Buy loan, you would need to repay the loan amount of £50,000. However, it's important to note that the repayment amount may vary depending on the current value of the property.
• Suppose the valuation comes back too high and it is now valued at £300,000. You would need to repay 20% of the help to buy valuation, which is £60,000, to clear the Help to Buy loan. 
• If you believe that the property is actually worth £275,000. You still need to repay the full 20% of the current property value (£60,000) to clear the Help to Buy loan, it means you would be paying an extra £5,000 compared to what you perceive as the property's true value.

This is why it is important to assess your options if your help to buy valuation comes back too high.

Options If You Find Your Help to Buy Valuation Too High

If you find that your Help to Buy Valuation has come in higher than expected, there are several steps you can take:

Review the valuation report

Carefully examine the valuation report to ensure there are no errors or discrepancies. Check the comparable properties used and ensure they are truly similar to your property in terms of size, location, and condition.

Get a second opinion

If you believe the valuation is incorrect, you can seek a second opinion from another RICS registered valuer. However, this will come at an additional cost. You must use a RICS surveyor to ensure your valuation can be accepted by the goverment for help to buy purposes. 

You can buy a second RICS survey from £199.

Negotiate with the government

If you have evidence to support a lower valuation, you can submit it to the government for consideration. However, this process can be lengthy and does not guarantee a change in valuation.

Wait longer for market conditions to settle

If the high valuation impacts your plans, such as selling or remortgaging, you may need to reassess your options, including waiting for market conditions to settle or exploring alternative financial solutions.

If you do wait a couple of months, even if you end up paying the help to buy interest, you may still be better off if you get the correct valuation you expect after all.

Why is Help to Buy Valuation Important?

A Help to Buy Valuation is an independent assessment of the current market value of a property purchased through the Help to Buy scheme. This valuation is required when you decide to sell your property or pay back the government loan.

The valuation is carried out by a Royal Institute of Chartered Surveyors (RICS) registered valuer, and it helps calculate the amount you need to repay the government based on the property's current value.

A fair and accurate valuation is essential to ensure both you and the government receive the correct share of the property's worth.

Should your valuation come back at an unfairly high price, it means paying more money back to the government to clear the help to buy loan. However, if you put the property on the market, the valuation may not reflect the sale price.

What Causes a Help to Buy Valuation to Be Too High?

Several factors can cause a Help to Buy Valuation to come in higher than expected. Some factors why properties may be misvalued include:

• Rapidly changing property prices. In areas where property prices are rising quickly, the valuation might come in higher than anticipated.
• Low transaction levels. If there aren't many comparable sales in the area, it can be challenging for the valuer to accurately estimate the property's value.
• Desirable property features. If your property has unique or highly sought-after features, this can increase its value.
• General market forces. The overall health of the property market and the economy can impact property valuations.
• Incomparable properties. If your property has a unique feature, such as a balcony, that other similar properties do not have.

These factors could leave to a surveyor over-valuing the property through ambiguity.

Impact of a High Help to Buy Valuation

A high Help to Buy valuation can bring several consequences for homeowners. Firstly, it means they will have to repay more money to the government than expected, exceeding their initial plans. This can strain their finances as they need to allocate additional funds for the repayment. Secondly, a higher valuation compared to similar properties in the area can make it difficult to sell the property. The higher price might discourage potential buyers, leading to challenges in finding interested parties. Lastly, a high valuation can affect mortgage applications for remortgaging or securing a new mortgage. It can limit the amount borrowers can borrow, potentially disrupting their financial plans and reducing their choices. Therefore, homeowners should consider the implications of a high Help to Buy valuation and carefully evaluate their financial situation and plans.

Overpaying on the Help to Buy valuation can have a significant impact on the amount of money available for the next property purchase. For example, let's say a homeowner initially anticipated a Help to Buy repayment amount of £10,000 based on the valuation. However, due to an overvaluation, they end up repaying £15,000 to the government.

As a result, they have to allocate an additional £5,000 towards the Help to Buy repayment, which reduces their available funds for the next property purchase. This means they have less money for a deposit, potential renovations, or covering other costs associated with buying a new property.

Tips for Avoiding a High Help to Buy Valuation

To minimise the chances of receiving a high Help to Buy Valuation, consider the following tips:

• Choose a reputable RICS valuer.
• Select a valuer with experience in your local property market and a solid track record of accurate valuations.
• Monitor the property market: Keep an eye on local property prices and trends to have an idea of what to expect from your valuation.
• Maintain your property: Ensuring your property is in good condition can help prevent any unexpected surprises during the valuation process.

Next Steps

If you have found your Help to Buy Valuation too high, it can cause issues for homeowners, from increased repayment amounts to difficulties selling the property. However, by understanding the factors that can lead to a high valuation and taking proactive steps to address them, you can minimise the impact and make informed decisions about your property's future. Don't hesitate to seek professional advice from a mortgage adviser or RICS registered valuer if you find yourself in this situation.