Help to Buy: Equity Loan


A scheme introduced by the government to aid first time buyers looking to get on to the property ladder.

The scheme is available at participating new builds across the country. It enables first time buyers to purchase a property with a 5% deposit and a 75% mortgage. The government provide up to 20% equity loan which is only repayable when the property is sold, or after 25 years, whichever comes first.

When the property is sold, the proportion of the property value will be repayable to the government. Eg. if they provide 20% loan on £150k property at purchase (£30k), if the property is sold  for £250k, 20% will be repayable (£50k).


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Key Info


  • Property must be up to £600k in value

  • You must have authority to proceed from the Help to Buy administrators – this is them confirming your eligibility and ability to afford the loan

  • Monthly management fee £1 from start until loan repaid

  • Interest free for 5 years, after this interest is payable at rate of 1.75% rising each year with inflation plus 1%

  • A reservation fee will be payable – normally circa £500-£1k

London Help to Buy

Works in the same way, however maximum equity loan available is up to 40% of property purchase price. Purchasers will still require a 5% deposit, therefore 55% mortgage.

Government Help to Buy ISA

This is a type of savings scheme where the government will pay you a 25% bonus on what you have saved in the ISA on completion.

ISA can be opened with a maximum deposit of £1,000 – monthly deposits of £200 are permitted thereafter. The ISA provider will pay interest, and bonus will be payable on completion.

Min bonus payable is £400, meaning you will have £1,600 saved up. Max bonus is £3,000 meaning you will have £12,000 or more saved up. You must be a first-time buyer to qualify for the bonus. If you are buying jointly, both applicants can claim the bonus from their ISAs.

 

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