FAQ: Equity Loans With The Help To Buy Scheme

The Help To Buy Scheme: the Government solution to help you buy your house.

The Help to Buy Scheme opens the door to buy your house in England.

It has been crafted to assist hard workers in jumping on the property ladder and includes the Help to Buy: Shared Ownership and Help to Buy: Equity Loan. In this guide, we’ll investigate the various aspects of the Equity Loan.

Please note, this guide will cover the various aspects of the Help to Buy in England only. Some aspects might differ in Scotland and Wales and it’s not available in Northern Ireland.

The Help to Buy Scheme: Equity Loan will be available in England until 2021.

WHAT’S THE HELP TO BUY SCHEME: EQUITY LOAN?

The Help to Buy: Equity Loan is a Government scheme tailored to help first-time buyers and homeowner to buy a new-build house up to a maximum value of £600,000. 

Successful applicants are able to receive an Equity Loan from the Government up to 20% of the full price of the house, and up to 40% if the house is in London.

A minimum deposit of 5% is required and you will be able to secure a mortgage for the remaining 75% or 55% if you are buying in London. Furthermore, Equity Loans are interest-free for the first 5 years.

WHAT PROPERTY CAN I BUY THROUGH THE SCHEME?

The Scheme is applicable to new-build homes from specific builders participating in the scheme. The value of the property must be £600,000 or less.

AM I ELIGIBLE?

You are eligible if you are buying a house in England which value os £600,000 or less and you can afford to pay a deposit of at least 5% of the total value.

Homeowners and first-time buyers can participate in the Scheme, but the house must be your only residence and you must be eligible for a standard mortgage on the part of the property not founded by the depositor Equity Loan. The mortgage must be provided by Help to Buy Lenders.

WILL I BE THE OWNER OF THE PROPERTY?

The Government will own a stake in the property until you pay the loan in full or sell the house.

HOW MUCH CAN I BORROW FROM A LENDER?

The mortgage element of 4.5 times your household incomes will determinate how much you can borrow. The lender must also be informed about your monthly costs, such as mortgage repayments, service charges and fees that cannot account for more than 45% of the net disposable income.

The loan repayment must be a repayment mortgage of at least 25% of the purchase price.

The Scheme is nor allowing interest-only mortgages.

WHAT COSTS SHALL I TAKE IN ACCOUNT?

The Scheme will require you to pay management fees of £1 each month (paid through Direct Debit) and interest fees after 5 years. You should budget yourself according to mortgage repayments, services charges if you buy a flat, Council Tax, bills, building an insurance and life insurance.

WHEN DO I PAY THE LOAN BACK?

You can repay chunks of your loan at any point. Each payment must be at least 10% of the prevailing market value, so if the house value increases from £200,000 to £220,000 you will pay back at least £22,000.

If the value of the property changes, you will need to take this into consideration. You will have to pay back the same share of the property. So then if the loan of the Government is 20%. Than you will pay back 20% of the value of the property according to the prevailing value.

The good news is that if the market contracts and the value decreases, you will pay back a lower amount.

CAN I STILL SELL THE HOUSE?

If you use the scheme to buy in England. Therefore you will receive 80% of the prevailing property value covering the mortgage. And cash deposit and the remaining 20% will be paid back on the Equity Loan.

IS THERE ANY RESTRICTIONS?

The Scheme has been crafted for buyers willing to live in the property. You cannot let your property until you have repaid the loan in full.

HOW CAN I APPLY?

You can check the official website that will guide you through the different steps of the application. Please remember that the help to Buy is availabel only frmo house builders that offers the scheme.