Help to Buy : Equity Loan

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.

help-to-buy-bournemouth

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.