Many of you may be aware of the previous Help to Buy scheme, well the good news is another is on it’s way, aimed specifically for first-time buyers. The scheme allows successful applicants to apply now for an equity loan and use the scheme to buy their new-build home on or after 1 April 2021.
The Help to Buy scheme is part of a larger policy helping people into homes through equity loans for first-time buyers, shared ownership and a £12 Billion investment in ‘affordable housing’ is aimed at helping the first-time buyer into the housing market whilst supporting the housebuilding sector during this particularly difficult time.
The way the scheme will work is relatively simple. First-time buyers that wish to buy a new-build home will be able to apply for an Equity Loan from the government for up to 20% of the home’s value (40% in London). The home-buyer then pays a deposit of 5% or more, with the remainder being covered by a mortgage of 25% or more of the value of the new home (55% in London).
The home that you buy must:
- be a new build
- have a purchase price of up to £600,000 in England (or £300,000 in Wales)
- be the only property you own
- not be sub-let or rented out after you buy it
- be one that you can show you cannot afford ordinarily
In addition to mortgage repayments, you’ll have to pay equity loan fees, but not for the first 5 years. In the sixth year, you’ll be charged a fee of 1.75% of the Equity Loan’s value. The fee then increases every year, according to the Retail Prices Index plus 1%.
Fees do not count towards paying back the loan, which must be paid back within 25 years or when you sell the property. This payment will be pro-rata to the loan amount.
For example, if your home is bought for £250,000 with a 75% mortgage, a 5% deposit and a 20% Equity Loan and it then goes up in value by 30% over 10 years, you would have equity in the property of £75,000 in total. The repayment of the Equity Loan capital as and when you sell would cost you £65,000 (£50,000 initial 20% loan plus 20% of the Equity created).
Contact us or book a free call or video appointment to speak to a specialist Help to Buy mortgage adviser.
Recent posts
With the stamp duty relief ending in England and Northern Ireland, we have listed the top 10 cheapest areas for first-time buyers as published by Rightmove.
Are you looking to purchase your first home but unsure where to begin? Here are some tips to get you started.
Choosing which fixed rate to go for has been a dilemma for many of our clients so far this year. There really isn’t a right or wrong answer, but below we will look into the pros and cons of a two-year and five-year to help you make the right decision for you.
Best UK Mortgage Rates this Week
15 days ago
Here are the lowest fixed mortgage rates of the week, available to first-time buyers, home movers, buy-to-let, and those remortgaging.
Call us for more information: 01628 507477 or email: team@mortgagerequired.com.
Stamp Duty Rush as Deadline Looms
16 days ago
According to Rightmove, a whopping 500,000 UK homebuyers are rushing to finalise their home purchase before the new Stamp Duty rules change in April.
The UK government is introducing new rules for Energy Performance Certificates (EPCs) that will impact landlords. Here's a summary of the key changes
Should I buy or rent in 2025?
23 days ago
Choosing to buy a house is one of the biggest decisions you are likely to make in your lifetime. There are many factors that influence a house purchase, these include: finances, housing market conditions, and mortgage rates.
ISAs: what are they, and which one is for me
26 days ago
Since being launched back in 1999 Individual Saving Accounts (ISAs) have been very popular for those wanting to put money into savings. There are four types of ISA, and the majority allow flexible saving and the ability to withdraw funds easily. There are financial penalties on certain products, these usually pay the most interest.
More information
Trusted by
