Here at Mortgage Light, we’ll always consider every possible route to help our clients find the best mortgage deal available to them, whatever their circumstances.
While many of our customers choose to buy a property on the private market, many others will make use of one of the schemes currently available to help more people buy their own home. One popular option is Help to Buy – a loan scheme designed, to put it simply, to make more homes financially accessible to more people.
So, what is Help to Buy and how could it help you? Take a look at our handy guide…
What is Help to Buy?
Help to Buy is an equity loan scheme offered by the Government in England. Available on purchases of new-build homes across the country priced at £600,000 and under, the Government will lend you up to 20% of the cost of your home – with no interest payable for five years – which means that your deposit and mortgage requirements are lower. You will only need a 5% cash deposit, and a mortgage to cover the remaining 75% of the value of your home.
In London, the Government will lend you up to 40% of the cost of a newly-built home. You will only need a 5% cash deposit and a mortgage to cover the remaining 55% of the value of your home.
What are the benefits?
- You only need a 5% deposit to secure your purchase, which means lower upfront costs – this could get you onto the ladder quicker.
- With a loan guaranteed by the Government, you will likely qualify for a wider range of mortgages as you are less of a risk to the mortgage lender. This can mean cheaper mortgage rates.
- You could buy a bigger home, or one with a higher purchase price, than you might otherwise have been able to buy.
- You will not pay any interest on your loan for the first five years.
Who is it for?
Help to Buy is available to people purchasing a newly-built home priced at £600,000 or under. At the moment, you don’t need to be a first-time buyer; it is available to existing homeowners who want to move. However, you must not own any other property at the time you buy and you are not allowed to sublet the home.
You will need to meet affordability criteria to successfully apply for a Help to Buy loan.
Where can I use it?
When you are house hunting, look out for the Help to Buy logo at residential housing developments and on websites – you can then contact the developer or the estate agent for details.
Or, take a look at the Government’s Help to Buy website. You can browse for properties here.
How do I pay it back?
Your Help to Buy loan must be repaid after 25 years, or earlier if you sell your home.
It is important to note that you do not pay back the monetary amount you borrowed. Instead you pay back the same percentage of the value of the home. So, if your home has increased in value during this time, you will pay back more money than you borrowed. If your home has decreased in value, you will pay back less money than you borrowed. You do have the option to pay the loan back more quickly if you are able, even if you don’t sell your home – the cost of the repayment will be based on the value of your home at the time.
You also have to pay interest, although you will not be charged any interest on your loan for the first five years. After this period, you pay an interest rate of 1.75% which will rise annually in line with the Retail Price Index plus 1%.
What do I do next?
If you are considering Help to Buy, we always strongly recommend that you speak to a financial adviser (your housebuilder can often put you in touch with one).
If you’d like to have a chat with one of Mortgage Light’s experts to understand more about the scheme and whether it is the best option to meet your circumstances, call us on 01908 597655 – we’re always happy to help.