Help to Buy
If you are looking to buy through one of the government’s new-build schemes such as Help to Buy, we can assist you.
The Help to Buy: Equity Loan allows a buyer to purchase a property on a new-build development with assistance from the government in the form of an equity loan. The government loans up to 20 per cent of the property value and the borrower contributes a minimum of 5 per cent deposit. The remaining amount is obtained from a participating mortgage lender.
To qualify, the property you want to purchase must meet the following criteria:
- New-build property only (from a Help to Buy registered developer)
- Maximum purchase price of £600,000.
- Must not be a second home.
- Cannot be rented out.
The scheme is open to both first-time buyers and home movers provided you buy a new-build property and your mortgage must be taken out on a capital and interest repayment basis.
The 20 per cent equity loan is interest free for 5 years and in year 6 a fee of 1.75 per cent of the loan is charged, paid monthly by direct debit. The fee increases annually by the Retail Price Index (RPI) + 1 per cent. The loan can be repaid at any time at an amount equal to 20 per cent of the market value, whether the property value has increased or fallen. Partial repayments are allowable at a minimum amount of 10 per cent of the market value at the time of repayment. The loan must be repaid on the sale of the property or after 25 years, whichever comes first.
London Help to Buy
On 1 February 2016 the government introduced London Help to Buy, increasing the upper loan limit on the Equity Loan scheme from 20 to 40 per cent for those buying in the London boroughs. This increase came into force in recognition of the higher cost of housing in London compared to other parts of the UK. The scheme is good news for those aspiring to become homeowners in the capital, who in the past would have struggled to get a foot on the ladder.
The criteria for the scheme is exactly the same as above and is good news for those who in the past may have struggled to get a foot on the ladder.
Help to Buy: ISA
The Help to Buy: ISA is a great way to save up for a deposit towards your first home as the government will boost your savings by 25 per cent. So for every £200 you put in, the government will pay you a bonus of £50. The maximum government bonus payable is £3,000.
The Help to Buy: ISA is available through a range of banks and building societies and can be taken out by each applicant on the mortgage application. If you are looking to buy with a partner, you could therefore receive a government bonus of up to £6,000 to use towards the deposit on your first home.
Each applicant can save up to a maximum of £200 each month and in the first month can deposit up to £1,200 in one lump sum.
The minimum government bonus payable is £400 meaning you have to save at least £1,600 before you can claim a bonus payment. To receive the maximum bonus payment of £3,000, you will need to have saved £12,000.
When you are ready to buy your new home, your solicitor will apply for the government bonus on your behalf. When the payment is received, it will be added towards the deposit on the property.
For further information on the different government schemes, please visit www.helptobuy.gov.uk