Eager to get on the property ladder? Can’t quite get that deposit together? There’s Help to Buy for that.
The Government’s Help to Buy scheme aims to help homebuyers with a deposit of 5% to buy a new-build home up to the value of £600,000. The Government lends eligible buyers up to 20% of the value of their home via an equity loan. The homebuyer will then only need to secure a mortgage for 75% of the property’s value.
In the past four years, the Help to Buy scheme has helped more than 200,000 people buy a new-build home. The scheme now accounts for one in 12 of all first-time buyers, making homeownership more achievable for people up and down the UK.
The scheme is available for new-build properties under £600,000. The Help to Buy equity loan can be paid back at any time while you live in the property or when you sell your home.
The equity loan is interest-free for the first five years, although you may still have to pay interest on your mortgage. Help to Buy is available to all new homebuyers, not just first-time buyers.
If you use the Help to Buy scheme, you won’t be able to sublet your home. You also cannot own any other property when you apply for a Help to Buy equity loan.
Help to Buy is only available for new-build homes in England.
Once you purchase your home, it will be in your name, which means you can sell it at any time. However, if you decide to sell your home, you will need to pay back your equity loan.
Let’s take an example. Let’s say you bought a home that’s worth £200,000. You put down a 5% deposit (£10,000), received a Help to Buy equity loan worth 20% of the value of the property (£40,000). You would then need to secure a mortgage of £150,000.
If you decide to sell the property, and the value of the property has risen to and sells for £210,000, you would get £168,000 (£157,500 value for the mortgage + £10,500 value of your deposit). You would then need to pay back the remaining equity loan worth £42,000, as well as any mortgage payments left from your share of the sale.
You can, however, pay some of your equity loan back sooner. You are entitled to pay either 10% or 20% of your equity loan back if your loan equates to a minimum 10% of the total value of your home.
These are just the basics. Help to Buy has many versions, from ISAs and Shared Ownership. Check out the Government Help to Buy website for more info.