Help to Buy schemes have been created by the government to assist in the purchase of homes. The main schemes are:
- Help to Buy: Equity Loans
- Help to Buy ISA
- Help to Buy: Shared Ownership
Help to Buy England, Equity Loan:
Under this scheme, the government lends you up to 20% of the cost of your newly built home from an approved developer and then shares in any increase (or decrease) of the property’s value. The property must be your only property and your permanent residence.
You will need to put in a cash deposit of at least 5% and then a mortgage of up to 75% to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home. The maximum purchase price the scheme will cover is £600,000.
When you sell the property the amount you will need to repay will include a share of any capital appreciation that has occurred.
For example, if you buy a property for £200,000 and take the equity loan for 20% of the value, i.e £40,000, when you sell the property say for £225,000 you will need to repay 20% of the selling price back to the government in repayment of the loan.
In this example, you would need to pay £45,000.
If however property prices have fallen and the market value of the property is now £175,000, then you would still pay the 20% back but this would have fallen to £35,000.
After the first five years, you will pay an additional fee as interest of 1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%.
Help to Buy London, Equity Loan:
With higher prices in London, from February 2016 the Government extended the scheme increasing the upper limit for the equity loan it will give to new home-buyers within Greater London from 20% to 40%.
To summarise, the important bits to remember about the Help to Buy Equity Loan in England are:
- Available in England for affiliated new builds with a value up to £600,000.
- Both first-time buyers and existing homeowners are eligible.
- Buyers need a minimum deposit of 5%.
- You must occupy the property and it must be your only property.
How to find a property on the Help to Buy scheme:
Unfortunately, the scheme is not available for all new builds. Your first step should be to check whether the developer that is building your property is taking part in the Equity Loan scheme. Most well-known developers are.