Before we make any decision it will be worth finding out a bit more about the Help to Buy Equity Share scheme and how it works. Let’s start with some information about government loans. (The rules regarding repaying Help to Buy will be discussed in future blogs).
Help to Buy Equity Share has been available since 2013 Government loan is available to purchase new build properties only.
At this point in time, the Help to Buy scheme is projected to end in April 2021. This is not a certainty and may change in the future.
To buy with the Help to Buy scheme you do not have to be a First Time Buyer, however, you cannot have any other property anywhere in the world. If you are a property owner this needs to be sold before you can complete it under the Help to Buy scheme.
Property purchased using the Help to Buy scheme must be your only residence.
Maximum property value bought through the Help to Buy scheme is £600,000.
The minimum own deposit is 5% and the maximum own deposit is 20% of the property value.
The maximum government loan is 20% of the property value (or up to 40% in some London boroughs).
Until you pay off your Help to Buy loan there are two charges otherwise known as secured loans on the property. The first charge is your mortgage from your bank, the second charge is from Help to Buy.
The Help to Buy loan is interest-free for the first 5 years. After this time, interest will be charged and the interest rate will increase every year.
Before you pay your reservation fee to reserve your plot, make sure you will be entitled to the government loan through your chosen developer.
This will save you money because you won’t be charged any interest at this time. The maximum term of the Help to Buy loan is 25 years. After this period the Help to Buy loan needs to be repaid in full.
With regards to extending or significantly modifying property, this needs to be approved before the work is carried out. Home improvements that are required because of the owner’s disability are to be discussed on an individual basis.
Property bought using the Help to Buy cannot be rented out (there are few exceptions).
When repaying the Help to Buy loan, the final sum to be repaid will be calculated as a percentage of the actual value of your property not how much it was purchased for.
Original property value £200,000, HTB equity loan taken 20% = £40,000
Property price when repaying HTB = £250,000
Therefore the sum to be paid back is 20% of £250,000 (the current price)= £50,000
We hope this short guide will help your understanding of the Help to Buy scheme a bit better and help you to make a decision that is right for you and your family.
If you have got any additional questions regarding Help to Buy please contact Five Star Mortgages!
Book an appointment through our form or call today on 0300 303 4676 to speak with one of our experienced financial advisors.