Q: I have a problem. I bought my flat in Manchester in June 2014 with an equity loan from the help-to-buy scheme. I met my partner in March 2015 and in September we decided to live together. Given our circumstances we decided to move into his house and I thought it would be good idea to rent out my flat.
Unfortunately the help-to-buy loan stipulates that I’m not allowed to rent out the flat, even though if I do it would just about break even after the service charge, mortgage, ground rent insurance etc.
Is there any advice you could offer? We don’t have enough money to repay the help-to-buy loan, which I think would require us to revalue the property at our own expense. BM
A: You are right that the help-to-buy rules say you are not allowed to let your flat. Just to make sure that prospective participants in the scheme understand this, the Help to Buy Buyers Guide published by the Homes and Communities Agency states (three times and in bold) that any property purchased through the scheme “must be your only residence. Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase.”
Except in exceptional circumstances – for example, you’re a member of the armed forces on a tour of duty away from home – if you wish to sublet your home you first have to repay the help-to-buy loan.
To do this, you are again right in thinking that you would have to pay to have your flat valued to determine how much you would have to repay. As you don’t have the ready cash to repay the loan, another option would be to increase your mortgage. To do this, you would need the permission of your help-to-buy’s mortgage administrator as well as your mortgage lender’s approval.
Depending on what your flat is worth, getting the necessary approval may not be that hard as increases to a mortgage are usually welcomed and approved if they are used for staircasing or repaying the equity loan.
If increasing your mortgage isn’t an option, you could get round the problem of not being allowed to let your flat by living there as a couple rather than in your partner’s house. Or you could lose the financial burden of the mortgage and other associated costs of home ownership by selling up.
