How does Help to Buy work?
With a Help to Buy Equity Loan the Government can lend you up to 20% of the cost of your new home. You’ll then only need a 5% deposit and a 75% mortgage to make up the rest of the value.
There are no loan fees charged on the 20% loan for the first five years of owning your home. You can pay back the loan at any time, or alternatively when you sell your home. If you still have the loan when you do come to sell, you will repay it at this stage. So if you initially purchased with a 5% deposit and 75% mortgage, you will repay 20% of the home’s value at the time you sell.
If you have not repaid your Help to Buy equity loan in full after five years, you will need to pay an interest fee of 1.75% of the amount of your equity loan at the time you purchased your property. This rises annually from the fifth anniversary of your equity loan by the increase (if any) in the Retail Price Index (RPI) plus 1%.
Help to Buy ISA
If you are saving to buy your first home, save money into a Help to Buy ISA and the Government will boost your savings by 25%. The maximum Government bonus you can receive is £3,000.
The accounts are available from a range of banks, building societies and credit unions and are available for each first time buyer, rather than each household. So if you are planning to buy with your partner, for example, you could receive a Government bonus of up to £6,000 towards your first home.
When you have chosen to buy your first home, you will need to instruct your solicitor or conveyancer to apply for your Government bonus. Once they have received this, it will be added to the money you are putting towards your first home.
The minimum bonus the Government will pay is £400, so you need to have saved at least £1,600 into your Help to Buy ISA before you can claim your bonus. The maximum bonus you can receive is £3,000 – to receive that, you need to have saved £12,000.
You will be able to apply to open a Help to Buy ISA until 30th November 2019.
The Help to Buy Scheme is only available to both first time buyers and previous homeowners until April 2021!
If you would like more information about the Help to Buy Scheme, we’ve picked out a few of the most useful websites below…
Official Help to Buy Website
This site gives a great overview of the scheme and includes details on the eligibility criteria for both the Equity Loan and ISA.
Money Saving Expert – Mortgage Schemes
This is a great resource for impartial advice about Help to Buy with a handy list of pros and cons.
Which – Help to Buy Explained
A clear, concise explanation of the scheme can be found in Which? ‘Mortgages explained’.