What is Help to Buy?
What is Help to Buy? The Help to Buy Equity Loan is available on newly built homes up to a value of £349,000 in the South West of England.
The Government, through the Homes & Communities Agency (HCA), will provide you with an equity loan of up to 20% of the value of the property which can be repaid at any time during the loan term (up to 25 years) or sooner on the sale of the property.
You’ll only then need to be able to secure up to a 75% mortgage from a bank or building society, meaning that typically you will only need to have to fund a 5% deposit.
Help to Buy Overview
With Help to Buy, the buyer (‘you’) buys a newly built home from a registered Help to Buy property developer with assistance from the HCA 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. 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 in the South West of England is £349,000. Your first mortgage must be on a repayment basis.
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 sale to the HCA 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%.
Who can take part in the scheme?
- It is open to all buyers seeking a new build home.
- You must have access to a minimum 5% deposit.
- Help to Buy buyers must be able to fund up to 75% of their selected property through a conventional repayment mortgage. Interest only mortgages are not permitted for Help to Buy.
- Buyers must take out a first charge repayment mortgage with a qualifying lender and the maximum purchase price is in the South West of England is £349,000.
- The local Home Buy Agent (acting for the HCA) will carry out an assessment of an application by a potential Help to Buy buyer to ensure that they are in a position to afford a conventional mortgage for their proposed purchase.
- At the time you buy your new home with a Help to Buy Equity Loan, you must not own any other residential property, or have your name attached to the deeds of another residential property in the UK or Ireland.
- You cannot rent out your existing home and buy a second home through Help to Buy.
- Applicants who make fraudulent claims for Help to Buy assistance will be liable for criminal prosecution and immediate repayment of the Help to Buy loan assistance.
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