Help to Buy: Complete Process
Help to Buy is a phrase you may have heard banded around quite a lot recently. That is because, since the scheme was first introduced in 2013, over 270,000 homes have been bought through Help to Buy.
Applying for Help to Buy is not easy, but here at mypropertyadvice.com we are here to help you through the process and realise the ambition of being a homeowner. Please see the below guide and do get in touch here for more information or to have one of our advisors help you through the application.
(Help to Buy in England differs to schemes available in Wales, Scotland, and Northern Ireland. This article relates to Help to Buy in England). :
What is Help to Buy
Help to Buy is a government initiative to assist first-time buyers achieve home ownership with a deposit as little as 5%. You can then borrow 20% of the purchase price (40% in London), interest free for the first 5 years. The scheme runs until 31 March 2023 and, although it has been extended in the past, there is no telling if it will continue beyond this point.
To give first-time buyers a helping hand onto the property ladder. The government has two main Help to Buy schemes including “Help to Buy: Shared Ownership” and “Help to Buy: Equity Loan”.
Help to Buy: Equity Loan
The Help to Buy Equity Loan is a government scheme that allows you to borrow a low-interest loan to put towards your deposit of purchasing a newly built home. If you can afford a mortgage but don’t have the savings available to secure it, it is a great way to beef up your deposit. Unlike Shared Ownership, this route enables you to own your home outright.
How does Help to Buy: Equity Loan work?
With a minimum of 5% of your new house price as a deposit, you can access a low interest equity loan of up to 20% of the property value (40% in London) to top up your overall deposit to 25% (or 45% in London). This equity loan is interest-free for 5 years, making your first home more affordable and can be repaid at any time during the term of the loan or when you sell your home.
You then need to secure a 75% mortgage (55% in London) to fund the remaining part of the property.
Am I eligible for Help to Buy: Equity Loan?
If you have not bought a property before and you are a first-time buyer, then this scheme could work for you.
You will need a minimum 5% deposit – this is £30k on a £600k London property – to qualify and there is no maximum household income to qualify for the scheme, and the maximum property price will vary in England, depending on the regional price cap. For help with your Help to Buy application form, or for more information, please contact us.
Help to Buy: Shared Ownership
Shared Ownership is a hybrid of renting and owning a property and is another way of getting a foot on the ownership ladder even if you aren’t currently able to get a property fully mortgaged.
This scheme allows you to own a share in the property and to rent the percentage that you don’t own at a reduced amount. You can buy a share of between 25% and 75% of your new home and pay rent on the remaining portion. The scheme also allows you to buy more shares in the property as time goes on.
Am I eligible for Shared Ownership?
You might you eligible to buy a home through Help to Buy: Shared Ownership in England if:
- your household earns £80,000 a year or less (£90,000 a year or less in London).
- you are a first-time buyer or,
- you used to own a home but can’t afford to buy one now or,
- you are an existing shared owner looking to move.
With Shared Ownership, you can buy a newly built home or an existing one through resale mechanism of the housing associations. You can fund the purchased share of the property via a mortgage or with savings.
You can only own a maximum of 75% of the property through this scheme, and it has to be resold through the specific resale programme of the given housing association. However, once you reach the maximum 75% share of ownership, you will no longer have to pay rent on this part of the property. Will still need to pay rent on the remaining 25%.
Need help finding a Help to Buy home?
The Help to Buy Equity Loan scheme is exclusive to new build homes only and not all house builders are registered for the scheme. For help finding a new home eligible for purchasing through the Help to Buy Equity Loan scheme, please speak to us for more information.
There is also a window of operation when a development is only able to be bought though the scheme. Once a new homes project is 6-9 months from completion, the scheme kicks in. It is at this point that more people can afford to buy homes in the project and sales start to pick up at a faster rate.
To be kept up to date with upcoming launches of Help to Buy schemes, please register here.
Help to Buy FAQs
Here are some of our Help to Buy Frequently Asked Questions for more info on how Help to Buy could help you to becoming a homeowner sooner:
How does Help to Buy Equity Loan work?
With Help to Buy Equity Loan, you need a minimum deposit of 5% of the value of your new home. The Government lends you an equity loan of up to 20% of the value of your home (40% in London), so you’ll only need a 75% mortgage (55% mortgage in London).
Where is the Help to Buy scheme available?
The Help to Buy Equity Loan scheme is available in England and Wales. The maximum value of the property you can buy with the scheme depends on where in the UK you are buying.
How long will the Help to Buy scheme run for?
The current Help to Buy Equity Loan scheme will be available until March 2023.
Do I need to be a UK citizen to apply for Help to Buy?
You do not necessarily need to be a passport holder but do require a UK visa to be eligible for Help to Buy Equity Loan.
Can I pay off the equity loan before the end of the first 5 years?
Yes. Once you have purchased your home, you can choose when to make voluntary part or full repayments outside of your normal repayment schedule. This is based on the market value at that time.
Will I be penalised for paying off equity Loan?
No. There are no penalties for paying the equity loan back early as there are with some mortgages. However, you will need to pay a share of any increase in the property.
If you have 20% as an equity loan, and your property has risen in value by £40,000, then 20% of this increase needs to be paid back when you pay off the loan.
Do I have to pay back my Help to Buy equity loan before I sell?
The equity loan must be repaid after 25 years or at the same time as you sell your home before the end of the 25 years.
When you buy a home with Help to Buy a second charge is placed on your property title at the Land Registry. This means you can’t sell your home unless the equity loan is paid. Unless you have repaid your equity loan in full already, you will repay the equity loan simultaneously when you sell.
How much of my Help to Buy equity loan will I have to pay back?
If you initially purchased your home with a 55% mortgage and a 5% cash deposit and have made no other early repayments on the equity loan, you will repay the full 40% of the value at the time you sell.
What happens when I come to sell my home bought with a Help to Buy equity loan?
You can sell your home on the open market just as you would with a home not bought with a Help to Buy equity loan. Once you have received an offer you’ll need to have the property valued by a chartered surveyor. You must then let the equity loan provider know the amount of the offer you have received and that you have instructed a surveyor. Your equity loan provider will then guide you through the next steps.
Help to Buy – Step by Step Guide
Buying a home for the first time through Help to Buy can be a lengthy and confusing process. In order to simplify things, here is our guide to buying through the Help to Buy Equity Loan scheme:
- Speak to mypropertyadvice.com for help filing your application form correctly
- Secure equity loan and mortgage in principle from bank
- Find an eligible home
- Put in an offer for your new home
- Reserve the home with a small deposit (usually £1,000-2,000)
- Exchange of Contracts
- Complete