Buying your own home is probably the largest financial investment that many of us will ever make. To ease the transition into home ownership and move you into a brand-new home quickly, we guide you every step of the way through an excellent Government scheme called the ‘Help to Buy Equity Loan’; a low-interest contribution, designed to ease the burden of saving for your deposit.
The Help to Buy Equity Loan qualifies those who are eligible to buy a newly built home, worth up to £600,000, with just a 5% deposit. The Government then supplements this by loaning you up to 20% of the purchase price, giving you a potential deposit totalling 25%. You can then apply for a mortgage of 75%* to make up the full purchase price of the property.
*Note: Individual circumstances apply, dependent on your income and expenditure.
Under the terms of the loan agreement, you are expected to repay in full, dependent on which of the following scenarios comes first: a) after 25 years, b) at the end of your mortgage term, or c) when you sell your home.
Also, by loaning you 20% towards your deposit, the Government is in effect investing 20% equity in your property. So, while you own 100% of the property, they are entitled to a stake in the profit should you opt to sell; in other words, if your property value goes up, you repay more, but if it goes down, you pay less.
The original purchase price of your home was £300,000 (20% deposit contribution of £60,000 from the Government).
It’s now worth £375,000, meaning that when you come to sell, the amount repayable grows to £75,000, representing 20% of the new value of your home, not the original purchase price.
Pay it off faster: you can pay off part of the loan early should you choose to, either at 10% or 20% of the amount remaining.
The 20% equity loaned to you is interest-free for the first 5 years, allowing you breathing room over a time when finances might be stretched. You then begin to pay off the annual interest fee from year 6, which is charged at 1.75% of the loan value and increases each year in line with the Retail Prices Index (RPI) inflation measure, plus 1%.
If the RPI is at 3%, then the interest rate would increase by 4% (3% RPI + 1%). So, since 4% of 1.75% is 0.07%, your interest rate becomes 1.82%.
The good news is that the interest fee is only payable against the original loan amount and is unaffected by any increase in the value of your home (unlike loan repayments). You’ll be contacted prior to the introduction of fees by a local Help to Buy Agent and you’ll also begin receiving annual statements.
First-time buyers and existing homeowners looking to make a move are both eligible. Bear in mind though, that there are certain restrictions in place to ensure that those who really need the help most are those catered for:
Many of our house builders offer the Help to Buy Equity Loan on new builds, so be sure to speak to one of our team, who will happily advise you on which homes are eligible.
It’s very simple:
1. Visit our website and browse our New Homes section and find a property that takes your fancy.
2. Contact us directly or visit us at your local office – we’ll gladly take you through your different options and answer any questions you might have, including booking in your property viewings (subject to the stage of the new build development).
If you require any further information on the Help to Buy Equity Loan, please contact us and we’ll make finding and moving into your brand-new home as easy as possible.