Help to Buy

Help to buy is where you can get financial help from the government to buy a home. Here are some frequently asked questions.

What the loans to be used for?

“What is a Help to Buy loan?”

The Government’s Help to Buy: Equity loans were first introduced in 2013 and are only available on the purchase of a new build property. With these loans the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and then a 75% mortgage to make up the rest.

For properties in London, from February 2016, the Government have increased the amount of equity loan available to Buyers from 20% to 40%.

What happens if you have more than a 5% deposit to put down towards the purchase?

“What happens if you have more than a 5% deposit to put down towards the purchase?”

You don’t have to borrow the full 20% equity loan (40% in London as mentioned above) and so if you want to borrow a lesser amount then this is also possible – there is no minimum amount.

The maximum amount that you can borrow in England is £120,000.00, and up to £240,000.00 in London.

Who can apply for the loans – is it just available for first-time Buyers like with the Help to Buy ISA accounts?

“Who can apply for the loans – is it just available for first-time Buyers like with the Help to Buy ISA accounts?”

No, with these equity loans they can benefit both first-time buyers as well as homeowners looking to move to a bigger property. The main conditions (aside from affordability checks as with any loan or mortgage) are that the property must be a new build property and it must not exceed £600,000.00 in value. You must also not be part-exchanging your current property with the Developer.

Are there any conditions attached to these loans?

“Are there any conditions attached to these loans?”

As with any type of mortgage or loan, you must abide by the Lender’s terms and conditions throughout the duration of the loan or risk the property being repossessed for a breach of their terms.

One of the main conditions of these equity loans, as is usually the case with any type of residential homeowner mortgages, is that you cannot sub-let the property. You must also not own any other property at the time you take out the equity loan (i.e. you must tie in the sale of your current property with the purchase of the new build property) and so these loans are not available to buy-to-let investors and the property must be your only residence.

When does the equity loan have to be repaid?

“When does the equity loan have to be repaid?”

The loan is repayable after 25 years from the date it is first taken out, or on the sale of the property if earlier.

Interest is not payable on the loan until year 5 after it is taken out and it is then charged at a rate of 1.75% per annum, increasing each year thereafter by any increase in the Retail Prices Index (RPI) plus 1%.

You won’t be charged loan fees on the 20% loan for the first five years of owning your home.

How much will we have to pay back when the loan comes to be repaid?

“How much will we have to pay back when the loan comes to be repaid?“

The total amount repayable will be based upon the percentage of the original property value that was first borrowed from the Government (i.e. if you take out a 20% loan then the repayment amount will be 20% of the property value at the time of repayment, plus interest and charges.)

A market valuation of the property will need to be obtained from a member of the Royal Institute of Chartered Surveyors and then this is sent to the Homes & Communities Agency for them to approve and for the redemption amount to be confirmed.

Any other questions ?

If you have any other questions relating to Help to Buy mortgages, or any other aspect of purchasing a property then please contact a member of our Residential Property team who will be more than happy to help.

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