Help to Buy
Help to Buy is a government backed scheme through Homes and Communities Agency (HCA) designed to help first time buyers buy their first property and home movers on new build homes with a purchase price of up to £600,000.
The scheme offers 10%, 15% or 20% equity loans.
You will need to contribute at least 5% of the purchase price as a deposit. Under the scheme the government will give you a loan for up to 20% of the purchase price. You will then need a mortgage of up to 75% to cover the remainder of the purchase price.
For example if you were to purchase a new build property for £200,000, you would need a cash deposit of £10,000 (5%), the Help to Buy equity loan would be £40,000 (20%) and your mortgage will need to be for £150,000 (75%).
The Help to Buy Equity Loan does not attract any fees for the first 5 years of you owning your home but in the sixth year you will be charged a fee of 1.75% of the loans value. After this the fee will increase every year and is worked out using the Retail Prices Index plus 1%.
You will be contacted by your Help to Buy agent before the fees start. They will set up a monthly payment with your bank and you will also be sent a yearly statement. It must be noted that fees do not count towards paying back the Equity Loan.
You will have to pay back the loan when you sell your home or after 25 years. The amount you will pay back depends on the market value of your home at that time. For example if the market value of your home was £250,000 but the original Equity Loan was for £40,000 (20%), you will pay back £50,000 (20% of the current market value). You can also pay back part or all of the Equity Loan at any time. The minimum percentage you can pay back is 10% of the market value of your home. The amount you pay will depend on the market value at that time.
If you want to benefit from a Help to Buy Equity Loan you must buy your home from a registered Help to Buy Builder. These include David Wilson, Bovis Homes, Cavanna Homes and Barrett Homes but to name a few.
The current Mortgage Providers lending on the Help to Buy scheme include the Halifax and Nationwide but these are for first time buyers only, NatWest, Woolwich, Santander, Leeds Building Society, Lloyds Bank, Skipton, Teachers Building Society, TSB, Virgin Money PLC and Aldermore.
You won’t be able to sub-let your home if you use this scheme and it must be your only property.
For advice on entering or paying back a Help to Buy scheme contact Rebecca Holloway on 01803 403403 or complete our contact us form for a call back.