Help To BuyGet on the property ladder.
Help To Buy is a government-backed initiative with a few schemes that allow individuals to get on the property ladder.
The Help To Buy: Equity loan scheme is one of the most popular schemes. It gives home buyers the
opportunity to get on the property ladder with just a 5% deposit. With some property deposits being very high, it is often difficult for home buyers to save enough for the deposit. Thankfully, the Help To Buy: Equity loan scheme makes it easier by allowing home buyers to get on the property ladder with just 5% and still have lower mortgage repayments than would be the case for a standard mortgage arrangement.
In this scheme, home buyers can borrow up to 20% (40% if in London) of the property purchase price from the government at an interest free rate for up to five years, as long as they have 5% of the property price. The remaining cost can then be covered with a mortgage loan from a lender.
There is an ongoing £1 monthly management fee for the 20% equity loan, and at the end of 5years, the home buyer begins to pay a monthly interest fee of 1.75% of the equity loan.
The interest fee will rise in April of each year by the Retail Price Index (RPI) plus 1% until the loan is repaid fully.
The equity loan is repaid when you either pay off your mortgage, sell your home or come to the end of your equity loan term. However, home buyers can choose to pay off the loan at any time or in 10% chunks before the end of the loan period.
*The amount you pay back on your equity loan is the percentage of the value of your home that you borrowed.
So, if the value of your home has increased at the time of sale, you will pay back the same percentage you borrowed but based on the sale price (Not the purchase price).
*It is important to note that there are slight variations in the Help To Buy Equity Loan scheme in England, Wales and Scotland, and also that the scheme is not available in Northern Ireland.
The Help To Buy: Shared ownership scheme is another popular Help to buy scheme. This scheme allows home buyers to own a share (between 25 – 75% of the home’s value) of a property by purchasing a percentage of the mortgage, and then pay the rest in the form of rent. The share owned can be increased at a later date when the buyer has more money and can afford to.
Not quite sure which Help To Buy scheme is best for you? Please Contact Us and one of our advisors will walk you through the details and help you choose the best scheme based on your personal circumstances. They will also help you with the paperwork and with choosing the best deal from top lenders.
The total amount you can borrow would vary from Lender to Lender and the amount stated above is an estimate of the maximum amount you can borrow based on your income.
The actual amount you can borrow will take other factors such as your credit score and current credit commitments into consideration. Thus, this should be used as a guide.
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