What is Help to Buy?
- The Help to Buy equity loan was set up by the government to enable buyers to purchase a new property, funded by a mortgage and with help from the Governments Home and Communities Agency (HCA).
- The loan can be up to 20% of the value of the home, and is interest free for the first five years.
- It means you can move with just a 5% deposit.
- It is open to all buyers seeking a new build home, with a maximum purchase price of £600,000.
How does it work?
- Your mortgage lender will require you to 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.
- The rest will be paid for with an equity loan from the Government.
- The property purchased must be your only residence. Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase.
How long does the process take?
Once you have found and reserved the property you want to buy, it is advised that you meet with a financial consultant who will submit a completed ‘Property Information Form’ to your local Help to Buy Agent.
Your Help to Buy Agent will seek to assess your affordability within four working days and will issue an ‘Authority to Proceed’, to your solicitor and the developer, which is valid for three months.
Generator asks that buyers exchange contracts within 28 days of making a reservation. You must legally complete on your purchase within six months of exchanging contracts.
Payments and Charges:
- You must pay a monthly management fee of £1 per month.
- 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 the property, rising each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%.
- 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 the HCA assisted your purchase with a 20% contribution, your repayment will be 20% of the total market value when it is sold.
For more information download your Help to Buy buyers guide here https://www.helptobuy.gov.uk/wp-content/uploads/Help-to-Buy-Buyers-Guide-oct-16-V1016.pdf.
Repayment values examples:
The best Help to Buy rate is currently with Santander at 1.59%. Over a 40 year term the monthly costs would be:
Purchase price – £255,000
Mortgage amount – £191,250
Help to Buy Equity Loan – £51,000
Own 5% deposit – £12,750
Monthly payments – £538.74*
Purchase price – £287,955
Mortgage amount – £215,965
Help to Buy Equity Loan – £57,590
Own 5% deposit – £14,400
Monthly payments – £608.36*
*This information is an example for guidance only. It is based on a 40-year term and a rate of 1.59%. All applications are subject to status.