Government Schemes - Help to Buy Equity Loan.
Buying a home is getting harder and harder with the rising cost of property and tightening of lending rules, saving for a deposit is proving for some to be impossible, but help is available in the form of Government incentive schemes.
Help to Buy Equity Loan.
Launched in 2017 The UK Government funded Help to Buy equity loan is designed to help people who are buying new build houses.
For some the idea of buying a new house is very attractive, all shiny and in most cases you get to cheese the interior and so buyers tend to pay a premium for new build, and if you then go on to sell, you will be selling a used property, so Mortgage Lenders are normally quite shy on the percentages they will lend 75-80% being normal.
The problem is then that for many raising a 25% deposit is too much, which then has a knock on effect in the mortgage market. So the government came up with a scheme where buy they will lend you up to 20% of the value of the property outside Greater London and 40% in it.
Your builders will advertise if they have signed up for the scheme, you will then need to find a Help to Buy agent if you need help the Government help to buy website has details or in Wales through the Welsh Government site.
How Can You Get the Loan?
First, you must meet the criteria
- Must be your only property, and you must live in it.
- The sale price of the property must be under £600,000 in England and £300,000 in Wales.
- You must be able to afford the mortgage and your income will be assessed to confirm this.
- Your deposit must be equal to or greater than 5% of the value of the property.
- You must meet your mortgage criteria.
Your builders will advertise if they have signed up for the scheme, you will then need to find a Help to Buy agent if you need help the Government help to buy website has details or in Wales through the Welsh Government site.
Just in the same way you have applied for a mortgage, you will need to complete an application form and provide evidence, once you have been accepted your solicitor will be informed.
Not all mortgage lenders are created equally, so make sure you tell your broker that you are applying for a Help to buy Loan, as some don’t like it.
Servicing and Repaying the Loan.
The loan is interest-free for the first 5 years, (6 in Wales); check the interest rates on the government site as they are subject to change.
The loan is for a 25year term, but the loan repayable will be based on the value of your house when you sell/repay not the original loan.
If you buy a property worth £200,000 and take a 10% loan and sell for £400,000 years later you will need to repay £40,000 not the original £20,000.
There are restrictions on what you can and cannot do and your solicitor needs to go over these with you.