Help to Buy

Help to Buy is equity loan assistance to home buyers from the Homes and Communities Agency (HCA).

help to buyHelp to Buy makes new build homes available to all home buyers (not just first time buyers) who wish to buy a new home, but may be constrained in doing so – for example as a result of deposit requirements – but who could otherwise be expected to sustain a mortgage. Up to a maximum of 20% of the purchase price is available to the buyer through an equity loan funded by the Government through the HCA.

Help to Buy is available in England. Help to Buy has been available since April 1st 2013. In March 2014, Government announced an extension of the initiative up to 2020 (it may close earlier if all of the funding is taken up before 2020).

Help to Buy Overview

With Help to Buy, the buyer (‘you’) buys a new home on a new build development with assistance from the Homes and Communities Agency (‘the Agency’) in the form of an equity loan.

You must take out a first mortgage (with a qualifying lending institution e.g. a bank or building society) for at least 25% of the value of the property you wish to purchase . This mortgage, together with any cash contribution from you, must be a minimum of 80% of the full purchase price. The maximum full purchase price is £600,000

Your cash deposit contribution must be a minimium of 5% of the full purchase price.

The Agency will provide an equity loan to fund the balance needed to make up the full purchase price of your home, a minimum of 10% and up to a maximum of 20% of the full purchase price

The equity loan must be repaid after 25 years or earlier if you sell your home. You must repay the same percentage of the proceeds of the sale to the Agency as the initial equity loan (i.e. if you received an equity loan for 20% of the purchase price of your home, you must repay 20% of the proceeds of the sale).

The equity loan is interest free for the first five years. After that, you will pay a fee of 1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%.

Local Help to Buy Agents will assess and approve your purchase for Help to Buy, and you need their approval before you proceed with the buying process.

Further details on all these points and the buying process, please download the complete guide: Help to Buy Buyers Guide.

How Does it Work?

Help to Buy enables buyers to purchase a new property, funded by a mortgage and with help from the Agency.

This enables you to take out a mortgage on which you make repayments in the normal way. Your mortgage lender is likely to require that you contribute a deposit and your mortgage and deposit must cover a combined minimum 80% of the total purchase price. The rest of the purchase price will be paid for with an equity loan from the Agency.

As a result of providing this assistance, the Agency has an entitlement to a share of the future sale proceeds equal to the percentage contribution required to assist your purchase.

For the first five years of Help to Buy home ownership there is nothing for you to pay on the amount that the Agency contributed to your purchase.

After five years, the equity loan will be subject to a fee (collected from you on behalf of the Agency by the Post Sales HomeBuy Agent) of 1.75% per annum on the outstanding amount of the equity loan. From the fifth anniversary of the loan this fee will increase each year by the increase (if any) in RPI plus 1%.

When you sell your Help to Buy home (unless you have chosen to repay your equity loan earlier), you must repay the Help to Buy assistance from a share of the sale proceeds. So, if the Agency assisted your purchase with a 20% contribution, your repayment will be 20% of the total market value when it is sold.

Further details on all these points and the buying process, please download the complete guide: Help to Buy Buyers Guide.

help-to-buyWorthwhile help to buy

Stacey an interior designer and Paul a graphic designer had been exploring the options for first time buyers and found out about the ‘Help to Buy Equity Loan’ by visiting a new development. Although that development wasn’t for them they really liked the idea of ‘Help to Buy’.

Stacey said; ‘Help to Buy has really made a difference to us, it helped us purchase a home sooner rather than later in the area we want to live”.

 

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Check that these mortgages will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.