What Is The Help To Buy Scheme?
Availability: England only
Help to Buy: Equity Loan (2021-2023), England.
How Does The Scheme Work?
First-time homebuyers who meet affordability and lending terms can borrow an equity loan of up to 20% (40% in London) of the sale price of a new build home. How much you can spend on your home will depend on which region it is in. North East £186,100; North West 224,400; Yorkshire and the Humber £228,100; East Midlands £261,900; West Midlands £255,600; East of England £407,400; London £600,000; South East £437,600; South West £349,000. You must fund at least 80% (60% in London) of the sale price with a mortgage and at least a 5% deposit.
Pay no interest on the loan for the first 5 years. Interest fees start at 1.75% and rise each year in April by the Consumer Prices Index including owner occupiers’ housing costs (CPIH) plus 2%. You pay a monthly management fee of £1 for the life of the loan. Homes England, the lender, secures the equity loan as a second charge on your Help to Buy home. You must repay the equity loan when you sell the home, pay off your mortgage or reach the end of your loan term. But you can repay all or part (10% at a time, or if you have a 40% loan, 20% or 30%) of the loan any time before then.
Here at Independent Mortgage Brokers, we have helped many eligible mortgage clients secure their dream home using the help to buy scheme. You can also obtain further advice from a solicitor who may be able to help you decide if Help to Buy is right for you.
How To Apply?
At Independent Mortgage Brokers, we can assist with the full Help to Buy application from start to finish, this is separate to your mortgage application and based upon household income. We can check if you meet the affordability criteria and then apply for the equity loan with you. The following steps give you a brief indication of the process.
Step 1 – Reserve a new build property with a homebuilder registered with the scheme
Step 2 – Independent Mortgage brokers will help you apply online through the Help to Buy agent in your region
Step 3 – The Help to Buy agent will assess your eligibility for the scheme and issue an Authority to Proceed
Step 4 – Authority to Proceed allows you to apply for a repayment mortgage and progress your application to exchange of contracts, where the Help to Buy agent will issue an Authority to Exchange
Step 5 – Once all the paperwork and dates are agreed and the home is built (practical completion), the Help to Buy agent will issue a Transaction Confirmation. This allows legal completion and funds to be transferred to the homebuilder.
Step 6 – After legal completion, the Help to Buy agent passes your details to the equity loan administrator to manage the equity loan account until it is paid in full.
Your home may be repossessed if you do not keep up repayments on your mortgage, equity loan or other loans secured against it.
Do You Already have a help to buy loan and want more information of how to redeem it?
Key Points To Remember
The purchase price cannot be more than £600,000
The Help To Buy Scheme is not available on properties over £600,000
From 2021 to 2023 the scheme will be restricted
Restriction to first-time buyers purchasing new build properties.
From 2021 new regional price caps will be introduced
This may reduce the maximum value of homes that can be bought through this equity loan scheme.
If you wish to use Help to Buy you can only take out a repayment mortgage
When A Help To Buy Equity Loan Cannot Be Used
second properties
To purchase a 2nd home or a property you wish to rent out in the UK or anywhere else in the world.
certain marital situations
If you are married and your current mortgage is your sole name, your partner, who is unnamed on the mortgage is unable to purchase another property using Help to Buy.
Part Exchange
If you are part-exchanging your existing property with the new build company.
