Want to buy your dream home sooner rather than later? With the Help to Buy: Equity Loan it’s easier than you think. Whether your a first-time buyer or current home owner, purchasing a brand new home has never been easier.
You just need to save for a 5% deposit and the government give you another 20% as an equity loan. This means you'll only need a 75% mortgage, making you much more attractive to lenders.
We know it can be a little confusing, that's why we've answered some of the most common questions below.
NOT BUYING A HOME IN ENGLAND? DISCOVER HELP TO BUY SCOTLAND
Help to Buy is a fantastic, government led scheme which helps people purchase a brand new home with a much smaller deposit.
With Help to Buy you only need a 5% deposit and the government gives you 20% as an equity loan. This means your mortgage is only 75%, giving you access to a wider range of lenders.
Almost anyone is eligible for Help to Buy, it's not just for first-time buyers.
So long as you don't own another property (aside from the one you're selling), you're a UK resident and you meet the affordability criteria, you can be eligible for a 20% loan from the government.
The affordability criteria is typically 4.5 times your combined gross income, minus the cost of any credit commitments (i.e. car payments or loan repayments).
For example, if you're purchasing as a couple with a combined gross salary of £45,000 and you have a car finance obligation of £149 per month, this is deducted from your income.
Financial commitments: £149 x 12 months = £1,788
Net combined income: £45,000 - £1,788 = £43,212
Mortgage limit: £43,212 x 4.5 = £194,454
Using this figure, the values are broken down as:
75% Mortgage: £194,454
20% Help to Buy loan: £51,854.40
5% Deposit: £12,963.60
This means that using the above example the couple could afford a house up to £259,272*
Absolutely, the idea behind Help to Buy is to help people onto the property ladder. Like any traditional mortgage, the goal for many buyers is to eventually pay off the mortgage on a property and own 100% of their home.
For the first 5 years of having the Help to Buy: Equity Loan there will be no interest to pay. After the first 5 years, you will only pay the interest of 1.75% of the loan amount at the time of purchase. This percentage will rise in line with RPI (Retail Price Index) every 12 months.
For the duration of the loan there will be a small £1 / month management fee.
The Help to Buy: Equity Loan is great because you only pay back what the value of that equity is worth. So if for instance your house value drops, so does the amount you pay back. The loan effectively scales meaning that if your house increases in value, remortgaging or selling become viable options to clear the loan.
Here are the common ways of paying back the loan:
1. Saving to pay off the loan
2. Remortgaging your home once you have built up enough equity in the property
3. Selling your property and using the proceeds of the sale to pay off the balance
Remember, for the first five years, the loan is interest free. Afterwards you pay just the interest on the balance remaining. The loan lasts for 25 years and can be paid back as early as you like, so long as each payment is at least 50% of the remaining balance.
No, Help to Buy can only be used for a single property.
Help to Buy only applies to brand new properties on building developments throughout England. The house value can be no more than £600,000.
If you're looking for a new home in Scotland, there's a similar Help to Buy scheme, you can read our FAQs on it here.
Most of our developments offer Help to Buy and our sales teams are more than happy to talk you through it in more detail. Explore our developments and speak to them directly.
Your dream home can be closer than you think.
No, it's not.
The Help to Buy: Equity Loan is a 20% loan provided to you by the government which is to be paid back. It can be used in conjunction with the Help to Buy: ISA which is a savings scheme that essentially gives you an additional 25% on top of your deposit. Find out more about the Help to Buy: ISA by visiting the government's website.
The Equity Loan cannot be used with Help to Buy: Shared Ownership. This is a different scheme whereby you mortgage a portion of your property and pay rent on the rest. This is great for people who cannot afford the full purchase price of their home straight away. You can find out more details by visiting the government's website.
You may also like to refer to the government's website for more information on Help to Buy.
*Examples are for illustration purposes only.
At Places for People we create homes to meet your needs.
Whether it's a one-bedroom city apartment on an historic site in central Edinburgh, or a large family home in the peaceful Wiltshire countryside, we have a fantastic range of homes to choose from.