What is Help to Buy?
The government has created the Help to Buy scheme for first time buyers to take their first steps on to the property ladder, or to help existing home owners move into a new home.
There are a number of options available to help get you moving:
Help to Buy: ISA
If you are saving to buy your first home, then use a Help to Buy ISA. If you do this, you will benefit from the government boosting your savings by 25%. So as an example, for every £200 you save you will receive a government bonus of £50. The maximum government bonus you can receive is £3,000.
Help to Buy: Equity Loan
With a Help to Buy Equity Loan* the government will lend you up to 20% of the cost of buying your new build home. Therefore, with a 5% cash deposit you will then only need take out a 75% loan to value mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first 5 years of owning your new home.
For more information on this, you can access the Help to Buy Guide on the government's website.
London Help to Buy: Equity Loan Scheme
To reflect the property prices in London, from February 2016 the government increased the Help to Buy: Equity Loan schemes upper limit from the standard 20% to 40%. The London Help to Buy Equity Loans* are available to all first time buyers as well as current home owners looking to move within all London Boroughs. The home you want to buy must a new build property with a price tag no higher than £600,000.
The government will lend buyers up to 40% of the cost of a new build home; you will need a minimum 5% deposit and a 55% mortgage to make up the rest. You will not be charged any interest on the 40% loan for the first 5 years of owning the new home. A management fee of £1 a month will applicable from the date you purchase the property. From year 6, a fee of 1.75% becomes payable on the equity loan, this will rise annually by RPI (Retail Price Index) inflation plus 1%.
The following example is based on you looking to purchase a new property costing £400,000. You would need your 5% cash deposit of £20,000, then secure a 55% mortgage from one of our lenders for £220,000. The government equity loan would then be £160,000 (40%). You would need to use this loan to pay off your share of the mortgage - remember you won’t be charged any loan fees on the first 5 years of owning your home.
For more information, speak to our Mortgage Consultants who will be happy to discuss the different options available and go through your application in more detail.
* Help to Buy Equity Loan: Unlike the mortgage amount borrowed, the Government’s loan is an equity loan so will rise and fall in line with the property’s value changing. The loan is interest free for 5 years. After 5 years the loan will be subject to an annual charge of 1.75% that will rise each year by the Retail Price Index plus 1%. The outstanding loan will need to be repaid upon sale of the property.
Terms & Conditions apply. Mortgage availability depends upon your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
A fee will be payable for arranging your mortgage. Your Mortgage Consultant will confirm the amount before you choose to proceed.