The Help To Buy Scheme - Everything You Need to Know

First introduced to the public on March 2013, Help to Buy is a government scheme which is designed to help First Time Buyers who are finding it difficult to save a house deposit get that all-important first step on the property ladder.

Since launching, the initiative has allowed thousands of people to get out of a rented property and into their own home. Although the scheme itself is relatively simple, there is a wealth of conflicting information online, which makes it easy to misunderstand or feel confused about.

In this article, we’re sharing everything you need to know about the Help to Buy scheme so that you can feel informed enough to decide if it’s the right option for you.

MS
Manning Stainton

Who is Eligible for Help to Buy?

Horsforth

Although Help to Buy is often associated with First Time Buyers, it’s not exclusively available to them. It’s also available to homeowners who’re looking to move, however, it’s only available for this buyer group if the property you’re purchasing is a New Build.

In terms of criteria that a person must meet in order to be eligible for help under the scheme, the maximum price of a new build property is £600,000. There are a few aspects of the scheme that you’ll have to keep in mind. For example, you won’t be able to sublet your home or enter into a part-exchange deal.

The scheme is restricted to people who don’t own any other property at the time that you buy your new home with a Help to Buy Equity Loan – that means that if you’re the owner of a Buy-to-Let property, you won’t be able to apply for Help to Buy.

How to Apply For Help To Buy

Horsforth

Whether you're applying for a Help to Buy ISA or an Equity loan will influence the process you need to take. Where the Equity Loan is concerned, there are government-appointed Help to Buy agents, who will be able to guide you through the process. Another viable route to Help to Buy is to contact an expert Mortgage Adviser, who will know the most up to date information regarding the scheme and will be able to help you feel more confident navigating the process. Look out for the Help to Buy logo which new-build developments which are part of the scheme will display. It's also worth reading the property description carefully to establish whether a property you're interested in falls under the scheme.

Help to Buy: The Equity Loan

Specifically restricted to new-build homes, the first part of the Help to Buy mortgage is an Equity Loan Scheme, which was launched on April 1st, 2013 and is available until 2020.

As set out by this section of the scheme, a potential buyer must raise 5% of a property’s value as a deposit, after this, the government will contribute a further loan of up to 20%, under the Homes and Communities Agency (HCA.) This allows potential homeowners to have a deposit of up to 25%, which will give them access to much more attractive mortgage rates from lenders who’re part of the scheme.

The cost of the government’s 20% section of the loan is really competitively priced, in fact, for the first five years; it’s completely interest-free. When it comes to year six, you’d be charged 1.75%, which will increase at a rate of 1% of that figure – plus an increase in inflation, every year after.

Those who borrow under the Equity Loan can choose to repay it at any time without any penalty. Borrowers can choose to pay back either 10% or 20% of the total amount, as long as the loan is worth at least 10% the value of your home.

However, if you don’t repay the equity loan whilst you’re still living in the property when you choose to move and sell the property, the government will reclaim its 20% in your home at its current value. So if your home has increased in price, it’ll be a considerable amount.

When it comes to the fine print, the Equity Loan aspect of Help to Buy is only applicable to properties worth up to £600,000. There’s no maximum income requirement, although the property MUST be a new-build home. Help to Buy can’t be used for buy-to-let properties and it must be your only property.

Normal mortgage checks apply, meaning that you’ll have to meet the mortgage lender’s criteria, i.e you should be able to cover monthly repayments and your credit score will need to be in a good condition.

Now the fine print is out of the way, here comes the fun part! Take a look at these properties and development projects currently on the market with Help to Buy schemes available!

If you have any more questions regarding the Help to Buy scheme or can see one of these properties as your new home please contact our new homes team.