From 1st April 2013, the “Help to Buy : Equity Loan” was opened to all those who aspire to own a new build home. The scheme will run until March 2016 or until the funds are exhausted. Over that period the government anticipate providing £3.5 billion of investment in England, whilst providing a boost to the construction sector.
How does it work? You will need to contribute a minimum of 5% of the purchase price as a deposit. The government will give you a loan for up to 20% of the purchase price. The remaining 75% will be provided by way of mortgage in your name.
But what does it cost me? The loan is fee free for the first 5 years. Effectively if you sell or remortgage within 5 years you wont be charged any fees. In year 6th year you will be charged 1.75% of the loans value. This fee will increase each year in line with Retail Price Index.
What else should I know? You will not be able to sub-let your home.
Is there a limit to the amount I can purchase for? Yes, the maximum purchase price will be £600,000.
How do I pay off the loan? You can pay off the loan at any time, either by selling your home (remember after 5 years you will need to pay back 20% of the sale price or the original loan amount which ever is higher), remortgaging your home (remember, redeeming a mortgage outside of a fixed rate period could incur your exit charges). Alternatively you can repay the loan at any time in full or in 10% increments.
The second tranche of the Help to Buy scheme, “Help to Buy : Mortgage Guarantee” was due to go live from January 2014. A tactical move from the current government has seen this go live with effect from 30 September 2013.