The property market has been an exceedingly difficult one to judge this year, with surveyors being very cautious at the...
The Help to Buy Equity Loan
Help to Buy Equity Loan
The Government has created the Help to Buy schemes, including Help to Buy: Shared Ownership and Help to Buy: Equity Loan, to help hard-working people like you take steps to buy your own home. Click on the following links to find out more and once you have decided that this is the right option for you, then call us on 0800 802 1003 or request a call back using the contact us tab on our website.
If I have a Poor/Bad Credit Profile will I still qualify for a Help To Buy Mortgage?
YES call us now 0800 802 1003
This is designed to help first time buyers get on the property ladder and to purchase a new build home. The following rules apply for you to be eligible;
- It must be a New Build property
- A maximum purchase of £600,000 in England and £300,000 in Wales will apply
- This must be the only property that you own
- The property cannot be rented out or sub-let after you purchase the property
How it Works
- You need a 5% deposit
- The Government will lend you up to 20% ( up to 40% in London ) on a low interest loan towards your deposit. This is called an equity loan.
- You need a mortgage of up to 75% for the rest (up to 55% in London)
- You must purchase the property from a registered Help To Buy Builder – your Help to Buy agent should have a list.
- You will have to pay equity loan fees, but not for the first 5 years
- You must repay the loan after 25 years
- You can repay part of the loan, at any time, with a minimum lump sum of 10% of the loan
Bad Credit?
- One of the very positive points of using the Government Equity Loan plan is the very attractive aspects that you will enjoy from the impact that the scheme has on the Bad Credit that the lender will accept. The lender will base their decision to lend based on a 75% LTV mortgage where they can be a little more flexile with the underwriting and the terms of the mortgage will reflect the lower risk to the lender and are therefore more attractive.
More Information about Help to Buy Equity Loans
1. Overview
You may be able to get financial help from the government to buy a home.
You could get:
- help with savings, through a Help to Buy ISA (UK wide) or low-interest loan (in England and Wales)
- a home through shared ownership (UK wide)
The Help to Buy mortgage guarantee scheme closed at the end of 2016.
Buying your council or housing association property
There are also schemes for council tenants and housing association tenants.
2. Help to Buy equity loan
You can get a low-interest loan towards your deposit. This is called an equity loan.
Eligibility
The home 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 one you own
- not be sub-let or rented out after you buy it
- be one that you can show you can’t afford (if you’re applying in Wales)
How it works
With an equity loan:
- you need a 5% deposit
- the government will lend you up to 20% (up to 40% in London)
- you need a mortgage of up to 75% for the rest (up to 55% in London)
You must buy your home from a registered Help to Buy builder – your agent should have a list.
There are different rules for equity loans in Wales.
Example
| For a £200,000 property | Amount | Percentage |
|---|---|---|
| Cash deposit | £10,000 | 5% |
| Equity loan | £40,000 (£80,000 in London) | 20% (40% in London) |
| Mortgage | £150,000 (£110,000 in London) | 75% (55% in London) |
Equity loan fees
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 loan’s value. The fee then increases every year, according to the Retail Prices Index plus 1%.
Your Help to Buy agent will contact you to set up these monthly fee payments. You’ll also get a statement about your loan each year.
Fees don’t count towards paying back the loan.
Paying back the loan
You must pay back the loan after 25 years or when you sell your home – whichever comes first. The amount you pay back depends on how much your home is worth (the market value).
Example
| Market value of your home | Equity loan | Amount |
|---|---|---|
| Bought for £200,000 | 20% | Borrowed £40,000 |
| Sold for £250,000 | 20% | Pay back £50,000 |
You can pay back part or all of your loan at any time. The smallest repayment you can make is 10% of the market value of your home.
Example
| Market value of your home | Percentage | Amount |
|---|---|---|
| Bought for £200,000 | Borrowed 20% | £40,000 |
| Value at time of payment £220,000 | Paying back 10% | £22,000 |
How to apply
Apply through the:
- Help to Buy agent in the area where you want to live, for England
- housing association, for Wales
3. Help to Buy ISA
If you’re saving to buy your first home, the government will top up your savings by 25% (up to £3,000). If you’re buying with someone else, they can also get a Help to Buy ISA.
You don’t have to pay it back.
Eligibility
The home you buy must:
- have a purchase price of up to £250,000 (or up to £450,000 in London)
- be the only home you own
- be where you intend to live
You can use the scheme with an equity loan.
How it works
Your first payment to your ISA can be up to £1,200 and then you can pay up to £200 each month. When you buy your property, your solicitor or conveyancer will apply for the extra 25%.
Example
| Your savings | Government payment | Total |
|---|---|---|
| £1,600 (minimum) | £400 | £2,000 |
| £4,000 | £1,000 | £5,000 |
| £12,000 (maximum) | £3,000 | £15,000 |
How to apply
Apply to one of the following providers:
- Aldermore Bank
- Bank of Scotland
- Barclays
- Clydesdale Bank
- Halifax
- HSBC
- Lloyds Bank
- Nationwide
- NatWest
- Newcastle Building Society
- Santander
- Ulster Bank
- Virgin Money
- Yorkshire Bank
4. Buying through shared ownership
You can get a shared ownership home through a housing association. You buy a share of your home (between 25% and 75%) and pay rent on the rest.
There are different rules in Northern Ireland and Scotland. Contact your local authority to find out about buying a shared ownership home in Wales.
Eligibility
You can buy a home through shared ownership if your household earns £80,000 a year or less (or £90,000 a year or less in London) and any of the following apply:
- you’re a first-time buyer
- you used to own a home, but can’t afford to buy one now
- you’re an existing shared owner
How it works
Shared ownership properties are always leasehold.
Older people
If you’re aged 55 or over you can buy up to 75% of your home through the Older People’s Shared Ownership (OPSO) scheme. Once you own 75% you won’t pay rent on the rest.
Disabled people
You can apply for a scheme called home ownership for people with a long-term disability (HOLD) if other Help to Buy scheme properties don’t meet your needs, for example you need a ground-floor property. With this scheme you can buy up to 25% of your home.
If you’re disabled you can also apply for the general shared ownership scheme and own up to 75% of your home.
Buying more shares
You can buy more of your home after you become the owner. This is known as ‘staircasing’.
The cost of your new share will depend on how much your home is worth when you want to buy the share.
It will cost:
- more than your first share if property prices in your area have gone up
- less than your first share if property prices in your area have gone down
The housing association will get your property valued and let you know the cost of your new share. You’ll have to pay the valuer’s fee.
Selling your home
If you own a share of your home, the housing association has the right to buy it first. This is known as ‘first refusal’. The housing association also has the right to find a buyer for your home.
If you own 100% of your home, you can sell it yourself.
How to apply
To buy a home through a shared ownership scheme contact the Help to Buy agent in the area where you want to live.
A fantastic service run by fantastic people. Always kept us updated a long the way from getting our mortgage offer all the way to completion, topped off by a lovely gift! Thank you Michael and Karen for everything you have done for us.
Dan and Chantelle
– Dan Webb – Reviews.co.uk
Relevant Products
A MORTGAGE 4 YOU
CAN WE HELP? YES!
A Mortgage 4 You are an established brokerage. We can help with a whole range of mortgage products including capital & interest (repayment mortgages).
Other Related Mortgages / Searches
- Help to Buy Mortgages
- Help to Buy Government Scheme
Best Government Help to Buy Savings
THINGS THAT WILL IMPACT YOUR CREDIT
Turned down elsewhere? We can help!
Whether you have been discharged 3 years or 12 months – it doesn’t matter, we can help.
We’ve been helping discharged bankrupts get back on to their feet and back on to the property ladder despite their circumstances. Arranging a bad credit mortgage or mortgage product for discharged bankrupts is a scenario we regularly deal with. Even if you have a history of bankruptcy and resposession we have access to whole of market lenders who will consider your application on various factors.