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Nov 10, 2022 · How does Help to Buy work? And what is it, exactly? In a nutshell, it’s a government scheme designed to help anyone struggling to save a deposit for their first home. It can also help them move up the property ladder as they have limited equity. We explain more below. Key takeaways.
- Key information
- What is Help to Buy?
- Help to Buy overview
- How does it work?
- Who can take part in the scheme?
- What does the Help to Buy Agent do?
- How to buy a Help to Buy home
- How long does the process take?
Amount of loan
The maximum you can borrow from Help to Buy in England is £120,000 and up to £240,000 for London. There is no minimum amount.
Buyer deposit required
Buyers must provide a deposit of a minimum of 5% of the full purchase price of the home bought under this scheme
Frequency, number and amount of repayments
After five years you will be required to pay an interest fee of 1.75% of the amount of your Help to Buy shared equity loan at the time you purchased your property, rising each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%. More details are on page 18. The loan itself is repayable after 25 years or on the sale of the property if earlier
Help to Buy is equity loan assistance to home buyers from Homes England[footnote 1].
Help to Buy makes new build homes available to all home buyers (not just first time buyers) who wish to buy a new home, but may be constrained in doing so – for example as a result of deposit requirements – but who could otherwise be expected to sustain a mortgage.
Up to a maximum of 20% in England and up to 40% in London[footnote 2] , of the purchase price is available to the buyer through an equity loan funded by the Government through Homes England.
Help to Buy is available in England from house builders registered to offer the scheme. Help to Buy has been available since 2013. In November 2015, Government announced an extension of the initiative up to 2021 (it may close earlier if all of the funding is taken up before 2021).
This guide provides an overview of the product. If you’d like to know more, or if you want to apply, please contact your Help to Buy agent www.helptobuy.gov.uk.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
With Help to Buy, the buyer (‘you’) buys a new home on a new build development with assistance from Homes England in the form of an equity loan.
For Help to Buy in England, not London, you must take out a first mortgage (with a qualifying lending institution e.g. a bank or building society) for at least 25% of the value of the property you wish to purchase. This mortgage, together with any cash contribution from you, must be a minimum of 80% of the full purchase price. The maximum full purchase price is £600,000.
For London Help to Buy 40% equity loan assistance, your first mortgage must be at least 25% of the value of the property you wish to purchase. The mortgage, together with the cash contribution from you, must be a minimum of 60% of the purchase price. The maximum full purchase price is £600,000.
Your cash deposit contribution must always be a minimum of 5% of the full purchase price.
Homes England will provide an equity loan to fund the balance needed to make up the full purchase price of your home, up to a maximum of 20% (40% maximum for London Help to Buy) of the full purchase price.
The equity loan must be repaid after 25 years, or earlier if you sell your home. You must repay the same percentage of the proceeds of the sale to Homes England as the initial equity loan (i.e. if you received an equity loan for 20% of the purchase price of your home, you must repay 20% of the proceeds of the future sale).
Help to Buy enables buyers to purchase a new property, funded by a mortgage and with help from Homes England.
This enables you to take out a mortgage on which you make repayments in the normal way. Your mortgage lender will require that you contribute a deposit (minimum 5% of the full purchase price). Your mortgage and deposit must cover a combined minimum of 80% of the total purchase price (or 60% of total purchase price in London). The rest of the purchase price will be paid for with an equity loan from Homes England.
As a result of providing this assistance, Homes England has an entitlement to a share of the future sale proceeds equal to the percentage contribution required to assist your purchase. Examples of this are shown below.
For the first five years of Help to Buy home ownership you will pay an initial monthly management fee of £1. This continues until the loan is repaid. After five years, the equity loan will be subject to an additional interest fee (collected from you on behalf of Homes England by Homes England’s Mortgage Administrator) of 1.75% per annum on the outstanding amount of the equity loan. From the fifth anniversary of the loan this fee will increase each year by the increase (if any) in RPI plus 1%.
The management fee and interest fees are not capital repayments to your Homes England equity loan – they do not reduce the amount owing.
When you sell your Help to Buy home (unless you have chosen to repay your equity loan earlier), you must repay the Help to Buy assistance from a share of the sale proceeds. So, if Homes England assisted your purchase with a 20% contribution, your repayment will be 20% of the total market value when it is sold.
It is open to all buyers seeking a new build home.
Help to Buy buyers outside London must be able to fund up to 80% of their selected property through a conventional mortgage and deposit. London Help to Buy buyers must be able to fund 60% of the property through a conventional mortgage and deposit.
Buyers must always provide a 5% cash deposit contribution (5% of the full purchase price).
Buyers must take out a first charge mortgage with a qualifying lender.
The maximum purchase price is £600,000.
The Local Help to Buy Agent (see below) will carry out an assessment of an application by a potential Help to Buy buyer to ensure that they are in a position to afford a conventional mortgage for their proposed purchase. This protects tax payers’ investment in the Help to Buy home. Buyers cannot use the scheme if they require a main mortgage more than 4.5 times their household income.
The Local Help to Buy Agents work on behalf of Homes England to signpost potential buyers towards Help to Buy schemes in their area and will carry out a sustainability check on applicants. Details of the policy the agents follow can be found on our guidance page and is updated from time to time.
They will also guide you through the process of buying your Help to Buy home and issue the approvals to your solicitor and the house builder to purchase the home through the Help to Buy scheme.
The role of the Local Help to Buy Agent is to:
•hold information about Help to Buy schemes for prospective buyers
•assess long term sustainability and eligibility
•give approval to a Help to Buy buyer’s solicitor/conveyancer to proceed with a purchase
Stage 1: Application
Contact house builders, visit schemes of registered house builders and identify your potential Help to Buy property. Its recommended that you see an Independent Financial Advisor (IFA) to gain confirmation of your financial status. The Local Help to Buy Agent and house builders will be able to suggest some IFAs for you to try. You must ensure you have funds to pay: a reservation fee if required (maximum £500) a deposit on exchange of contracts of at least 5% of the full purchase price (some main mortgage lenders may require higher deposits) other fees on completion (e.g. stamp duty, legal fees, main mortgage fees). You complete a Help to Buy “Property Information Form” (available from the house builder). You must complete this with details of your proposed purchase, your proposed main mortgage, deposit and including your household income. The Property Information Form also confirms your agreement to the funds due under the Help to Buy mortgage being paid directly to the house builder. You must also reserve the home. You will usually be expected to pay a reservation fee to the house builder. The signed Property Information Form and a copy of the builder’s reservation form must be sent to the Local Help to Buy Agent.
Stage 2: Authority to Proceed
Your Local Help to Buy Agent checks you can afford your main mortgage and ensures you have signed the declaration that the Help to Buy home will be your only residence. This is to protect tax payers’ investment in the Help to Buy equity loan. If affordable, you will receive an “Authority to Proceed” from your Local Help to Buy Agent within four working days of the house builder submitting your fully completed Property Information Form and reservation form to the Local Help to Buy Agent. This process may be delayed if you do not fully complete your Property Information Form. You instruct a solicitor to act for you and tell your IFA so that a full mortgage application can be submitted. The ‘Authority to Proceed’ will be accompanied by instructions to you and your solicitor/conveyancer. This pack will include legal documents that will be explained to you by your solicitor/conveyancer. You should only submit your main mortgage application once you have the “Authority to Proceed” from the Local Help to Buy Agent.
Stage 3: Mortgage offer and exchange of contracts
Your solicitor/conveyancer will advise you and ensure you sign the sale contract and the Help to Buy equity loan. Your solicitor/ conveyance will explain the legal implications of the equity loan, that the Help to Buy home must be your only residence and the consequences of a fraudulent application (see below). Your solicitor/conveyancer checks that your mortgage offer, property price and available funds are consistent with the Authority to Proceed, and requests permission to exchange contracts from the Local Help to Buy Agent. Your Local Help to Buy Agent issues approval to your solicitor/conveyancer and contracts are exchanged. You will have paid a deposit if required and are now legally contracted to complete the purchase by an agreed date.
Once you find a property you want to buy, you need to reserve it and submit a duly completed ‘Property Information Form’ to your Local Help to Buy Agent.
Your Local Help to Buy Agent will seek to assess your affordability (from a fully completed Property Information Form) within four working days and will issue an Authority to Proceed.
Your Local Help to Buy Agent’s ‘Authority to Proceed’ is valid for three months – the time limit for exchange of contracts. Typically, most house builders will be seeking buyers to exchange contracts within one month of making a reservation. You must legally complete on your purchase within six months of exchanging contracts.
You are responsible for securing your mortgage and appointing your solicitor/conveyancer, although your Local Help to Buy Agent and house builders will be able to suggest some options.
Nov 1, 2022 · The Government's Help to Buy Equity Loan scheme is designed to help those struggling to save for a deposit for a home to get on to the housing ladder in England, by giving a loan worth up to 20% of the property value (40% in London), which is interest-free for the first five years.
You can no longer apply for a Help to Buy: Equity Loan for properties in England. Find out about other ways to get financial help from the government to buy a home.
- You’ll need to: pay interest on your equity loan pay a management fee repay your loan How much you need to pay in interest and loan repayments depe...
- You do not have to pay interest for the first 5 years. In the sixth year, you’ll be charged interest at a rate of 1.75%. This will be applied to th...
- You’ll need to pay a monthly management fee of £1 until you pay off the equity loan. If you change your equity loan, including if you remortgage or...
- You can pay back part or all of your equity loan at any time. Repayments are based on your equity loan percentage and the market value of your home...
- Read guidance on how to: remortgage your Help to Buy home make structural alterations to your Help to Buy home sublet your Help to Buy home change...
- Contact the Help to Buy customer service team for help managing your equity loan. Help to Buy customer services customerservices@myhelptobuyloan.co...
- Your guide to a Help to Buy: Equity Loan. As a first-time buyer searching for a newly built home, you may need a little financial help. With the government’s Help to Buy: Equity Loan scheme, buying your own home could become a reality.
- What is the Help to Buy: Equity Loan scheme? This is a government scheme for first-time buyers. It provides a loan, called an equity loan, that you put towards the cost of buying a new build.
- Who provides the equity loan? We, the Homes and Communities Agency (trading as Homes England), provide equity loans. We are a government agency funded by the Department for Levelling Up, Housing and Communities.
- Key things you should know before taking out a Help to Buy: Equity Loan. Help to Buy is not a discount scheme or a price reduction - the cost of the home will be the same whether or not you get an equity loan.
May 19, 2023 · How does Help to Buy work? Help to Buy is an equity loan initiative, which means you borrow a percentage of the property's value. First time buyers can borrow up to 20% of the property value, providing the home is under £300,000 in Wales.
People also ask
What is help to buy & how does it work?
Can I use help to buy to buy a house?
Does help to buy work in Wales?
Can I still apply for a help to buy loan in England?
When is the cheapest time to use help to buy?
What is the help to buy equity loan scheme?
Help to Buy is a government scheme to help first-time buyers buy a property. It’s now closed in England and Scotland, but still available in Wales. Find out more about the scheme, other options and how to manage your equity loan.
