07.02.2019

Open the door to owning your own home….

Help to Buy has been available since 2013 and has already funded more than 71,000 people across the country to buy their home.

What is a Help to Buy: Equity Loan?
This scheme was set up to assist more people in purchasing their own home. If you qualify for the Help to Buy Scheme the Government can lend you up to 20% of the cost of your newly built home, so you will only need a 5% cash deposit and a 75% mortgage for the remainder. The Government can lend up to 40% for properties located in London.

How does the scheme work?
Help to Buy assists buyers to purchase a new property, funded by a mortgage and with help from Homes England.

This will enable the purchaser to take out a mortgage on which they can make repayments in the normal way. The mortgage lender will require that the purchaser contributes a deposit, which must be a minimum of 5% of the full purchase price. Therefore, the mortgage and deposit must cover a combined minimum of 80% of the total purchase price (or 60% of the total purchase price for properties in London). The remainder of the purchase price will be paid with an equity loan from Homes England.

As a result of providing this assistance, Homes England will have an entitlement to a share of the future sale proceeds equal to the percentage contribution required to assist your purchase (unless you have chosen to repay the loan earlier).

Homes England entitlement to a share of the future sale proceeds, is secured through a second charge on the property. The main mortgage lender will secure their interest in the property by way of a first legal charge on the property.

For the first 5 years of Help to Buy home ownership the purchaser will pay an initial monthly management fee of £1. This continues until the loan is repaid. After 5 years the equity loan will be subject to an additional interest fee. Please speak with a Help to Buy agent who will be able to discuss this further. Please note that the management fee and interest fees are not capital repayments on the Equity Loan, and they do not reduce the amount owing.

Help to Buy: Are you Eligible?

• This scheme is available to first time buyers and existing homeowners looking to move.
• Help to Buy purchasers outside London must be able to fund up to 80% of their selected property through a mortgage and deposit. London Help to Buy purchasers must be able to fund 60% of the property through a mortgage and deposit.
• The home must be newly built and no more than £600,000. Therefore, the maximum amount that a purchaser can borrow from Help to Buy in England is £120,000 and up to £240,000 for properties in London.
• Buyers must take out a first legal mortgage with a qualifying lender. The Solicitor/ Conveyancer will check that the lender is compliant before a sale can proceed.
• Help to Buy always requires that the buyer has a main mortgage of at least 25% of the full purchase price.
• The buyer will be unable to sublet the property or enter a part exchange deal on their own home.
• The buyer must not own any other property at the time they purchase their new home with a Help to Buy Equity Loan.

Other points to consider…

• The loan itself is repayable after 25 years or on the sale of the property if earlier.
• The buyer will have the option to repay the loan in parts. Please speak to a local Help to Buy Agent who will advise further in this respect.
• When a buyer owns a Help to Buy home, they are unable to purchase a second home unless they repay the Help to Buy Equity Loan.
• The buyer must repay the same percentage of the proceeds of the sale to Homes England loan as the initial equity loan- e.g, if the buyer received an equity loan for 20% of the purchase price of their home, they must repay 20% of the proceeds of the future sale.
• What happens if the property value falls? Help to Buy Equity Loan commits the buyer to repay a percentage of the market value equal to the percentage contribution of assistance received. This means that if the value of your property falls below the level at which it was first purchased, the buyer will repay less than the original amount Homes England contributed to the original purchase.

New Help to Buy Scheme announced…
The Government has announced a new Help To Buy scheme to run from April 2021. It is restricted to First Time Buyers and will include regional property caps to ensure the scheme reaches people who need it most.  There are no changes to the current Help to Buy: Equity Loan scheme detailed above, which runs to March 2021.

The new scheme will run from April 2021 to March 2023.