How does your Help to Buy scheme work?
Help to Buy: Equity Loan is a Government run scheme that allows you to buy a new home with a 5% deposit and up to 20% interest free equity loan. With Help to Buy, you could need a smaller mortgage, making it easier to buy a new home.
Up until the 15th December 2020, Help to Buy was available to both first time buyer and existing home owners on homes worth up to £600,000. Homes sold under this version of Help to Buy must be fully built by the end of 2020 and should be legally completed by the end of March 2021 - although there are a few exceptions due to the delays caused by the Covid-19 pandemic.
How does the old scheme work?
* The Government backed equity loan of up to 20% of the property’s value is interest free (in England and Wales) for the first five years.
Help to Buy: Equity Loan, England. Homebuyers who meet affordability and lending terms can borrow an equity loan of up to 20% (40% in London) of the sale price of a new build home. The price of the home can be £600,000 or less. You must fund at least 80% (60% in London) of the sale price with a mortgage and at least a 5% deposit. Pay no interest on the loan for the first 5 years. Interest fees start at 1.75% and rise each year in April by the Regional Price Index (RPI) plus 1%. You pay a monthly management fee of £1 for the life of the loan.
Homes England, the lender, secures the equity loan as a second charge on your Help to Buy home. You must repay the equity loan when you sell the home or pay off your mortgage. You can repay all or part (10% to 30%) of the loan any time before then. An independent financial adviser and a solicitor may be able to help you decide if Help to Buy is right for you.
Your home may be repossessed if you do not keep up repayments on your mortgage, equity loan or other loans secured against it.