Most house-hunters have heard of Help to Buy but often rule it out as an option for them, as they aren’t first-time buyers.
If this sounds like you, then think again. Because the scheme, first announced in the March 2013 Budget, isn’t the exclusive domain of first-time buyers.
Help to Buy includes an Equity Loan Scheme. This is available both to first-time buyers and to those who are moving home. However, it is restricted only to new-build homes.
Here’s how it works:
If you are buying a property, you will need to raise 5% of the value as a deposit. The government will fund a further loan of up to 20% through the Homes and Communities Agency (HCA).
This gives you a combined deposit of potentially 25% – and then you’re in a much better position to apply for a mortgage with those lenders who participate in Help to Buy. This allows you to obtain a mortgage of 75% of the purchase price through a high street lender which helps to keep your monthly mortgage payments lower to start with.
The cost of the government’s loan is attractive; for the first five years, it’s interest-free. In year six, you will be charged interest every year thereafter, but you are free to sell the house at any time within the 5 year period or later. If the government has contributed 25% towards the house purchase, it will expect to receive back 25% of the sale price on completion.
You are also free to pay off some or all of the loan owed to the government which many house buyers do, once they are comfortable with their monthly outgoings and can afford to do so. Some lenders will allow you to take a further advance on their original mortgage to pay off the government loan.
The Equity Loan Scheme applies only to new-build properties worth up to a certain value and it must be your main residence. Help to Buy cannot be used for second homes.
If you are looking for your first home, or a new home, and are thinking about buying a new-build property, Help to Buy could be an ideal way to get on to the property ladder or to move up it.
Our conveyancing team at Optimum Professional Services can guide you through the legal process. Please get in touch for a no obligation chat.