hELP TO BUY
Help to Buy equity loans are only available in England, although similar schemes have been made available by the Scottish Government, the Welsh Government and the Northern Ireland Housing Executive.
Help To Buy Equity Loans
Help to Buy equity loans are only available in England, although similar schemes have been made available by the Scottish Government, the Welsh Government and the Northern Ireland Housing Executive. Equity loans are open to people who want to buy a new-build property, and who have a 5% deposit available. The government will top up your deposit with an equity loan of up to 20% of the property value (maximum £120,000) – in this case, you would take out a 75% mortgage from a lender to buy the property. For buyers in London only, the maximum equity loan is 40% of the property value, up to £240,000. The maximum full purchase price is £600,000 in both London and the rest of England.
Once everything is up and running, you will make monthly payments to the mortgage lender as normal, but when it comes to the equity loan no interest is charged or regular repayments required – other than a £1 monthly management fee collected by Direct Debit – for the first five years. After five years, an interest rate of 1.75% is charged; in subsequent years, the interest fee increases by inflation (measured as the percentage increase in the retail price index) plus 1%. You can either repay the loan in stages (in minimum 10% increments) at any time, or pay it off when you sell the property; the maximum repayment term for the Governments equity loan element is 25 years.
It is important to be aware that when you repay an equity loan, the repayment amount is based on the value of your property at that time, not the original loan amount. For example, let’s say you were buying a property for £200,000. You have a £10,000 deposit (5%), take out an equity loan for £40,000 (20%) and take a mortgage for £150,000 (75%) to complete the purchase. If you sell the property in 10 years’ time and the value has risen to £300,000, then you would need to repay £60,000 (20% of the property’s sale value) to the equity loan. Your share of the sale proceeds would be £240,000 (80% of the sale value) from which you would repay any outstanding mortgage balance.
Shared ownership schemes have existed in various forms for years, and under the current Help to Buy scheme are available to first time buyers, people who used to own a home but can not afford to buy one now, or who are an existing shared owner looking to move. If you have a household income of under £80,000 a year (or £90,000 in London) shared ownership allows you to take out a mortgage to buy a percentage of the property (typically between 25% and 75%) and pay rent to the housing association for the remaining portion of the property, which they own.
The Help to Buy shared ownership scheme can be used to purchase either designated newly built or existing properties. Similar shared ownership schemes are available in Scotland, Wales and Northern Ireland.
The various Help to Buy schemes have and will continue to represent a step forward in promoting affordable home ownership. However, to ensure you find the scheme or mortgage which presents the best option for you, speak to one of our expert mortgage brokers today.
At Hypo Financial we specialise in Help to Buy and similar schemes, and have helped many would-be homeowners get on the property ladder. We can provide expert, impartial advice on home-mover and first-time buyer mortgages and remortgages.
Your property may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. The precise amount will depend upon your circumstances.A mortgage fee payable is dependent on the complexity of the case and will be agreed at the outset. A fee of up to 1% of the loan amount is payable, for example on a £100,000 mortgage a 1% fee would equate to £1,000. A typical fee is £399 and is payable at the outset or on the issue of an offer of the mortgage.
Terms & conditions apply for further information https://www.helptobuy.gov.uk/
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