With would-be buyers still facing a number of financial stumbling blocks to getting on the housing ladder, the government has introduced a new scheme to get the UK’s property market on the move.
The Help to Buy scheme allows all those seeking to purchase a home the opportunity to snap up a new build property for as little as a 5% deposit.
How does the scheme work?
The first step to buying a property via the Help to Buy Scheme is finding a Help to Buy agent through the website helptobuy.org.uk who will connect you to developments that are participating in the scheme and guide you in the process of applying for an equity loan.
You will then need to secure a mortgage for 75% of the property’s value, up to a maximum of £600,000 with the remaining percentage made up by a 20% equity loan from the government and your 5% deposit.
Help to Buy is currently only available for new build properties, but from 1st January 2014 the Help To Buy mortgage guarantee scheme will be introduced, which will also apply to existing properties – though you won’t be able to purchase a property under the scheme if you are planning to rent it out.
How will I pay back the equity loan?
No fees will be charged on your equity loan for the first five years, and 1.75% of the loan’s value will apply from the sixth year. This will increase on an annual basis, and can be calculated on the Retail Prices Index (RPI) plus 1%.
Your HomeBuy agent will inform you before fees come into effect, and help to set up monthly payments with your bank.
Your equity loan can be paid back at any time. However, you must pay back your equity loan when you sell the property or when the mortgage term comes to an end – whichever occurs first.