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Help to Buy mortgages incorporated four separate schemes when they were announced in the 2013 budget, intended by the government to help first-time buyers and home movers to be able to afford to buy new homes in the current economic climate and housing market. The four initiatives that made up Help to Buy were equity loans, shared ownership, New Buy and the mortgage guarantee.


What is the Help to Buy mortgage process?

The Governments help to Buy scheme could help you purchase your new home as a first time buyer or as a home mover needing to move on to their next property however, what is the Help to Buy process and where do you start. Check your eligibility first. The scheme is fairly basic in its criteria but do ensure you meet the minimum requirements first. These can be found on our site or from the Governments Help to Buy website.

If happy you fulfil the basic eligibility you will now need to check on your budget. This will, in the most part, be determined by the amount of mortgage you can obtain albeit there is a maximum purchase price that applies of £600,000. In addition to checking how much you can borrow from a lender you will also need to have this checked by the help to buy agent for your area. This can be done initially by completing the help to buy calculator.
Finally, once satisfied that the scheme is the right thing for you and the numbers involved are attainable, you can now start to look for your new home.


Do I qualify for Help to Buy?

If you are interested in the Governments Help to Buy scheme you will need to know a few minimal basics to check if you qualify.

• Available to First Time Buyers and Homeowners looking to move.
• The property being purchased must be a new build and no more than £600,000.00
• You cannot sublet the property nor participate in a part exchange for your current home.
• You must not own any other property at the time you own your new home
• The scheme is available in England only. Scotland, Wales and Northern Ireland run their own similar schemes.
• You will need a minimum 5% cash deposit.

Although the criteria remain the same for those looking to purchase in London, due to the current property prices in Greater London the upper limit for the equity loan in this area has been increased from 20% to 40%. This covers the basics but do ensure you get all the required information in relation to how the scheme works before making a commitment. More can be found on the Governments Help to Buy website or please speak to a help to buy mortgage broker such as ourselves.


Help to Buy Equity Loans

Help to Buy equity loans are only available in England, although similar schemes have been made available by the Scottish Government, the Welsh Government and the Northern Ireland Housing Executive. Equity loans are open to people who want to buy a new-build property, and who have a 5% deposit available. The government will top up your deposit with an equity loan of up to 20% of the property value (maximum £120,000) – in this case, you would take out a 75% mortgage from a lender to buy the property. For buyers in London only, the maximum equity loan is 40% of the property value, up to £240,000. The maximum full purchase price is £600,000 in both London and the rest of England.
Once everything is up and running, you will make monthly payments to the mortgage lender as normal, but when it comes to the equity loan no interest is charged or regular repayments required – other than a £1 monthly management fee collected by Direct Debit – for the first five years. After five years, an interest rate of 1.75% is charged; in subsequent years, the interest fee increases by inflation (measured as the percentage increase in the retail price index) plus 1%. You can either repay the loan in stages (in minimum 10% increments) at any time, or pay it off when you sell the property; the maximum repayment term for the Governments equity loan element is 25 years.
It is important to be aware that when you repay an equity loan, the repayment amount is based on the value of your property at that time, not the original loan amount. For example, let’s say you were buying a property for £200,000. You have a £10,000 deposit (5%), take out an equity loan for £40,000 (20%) and take a mortgage for £150,000 (75%) to complete the purchase. If you sell the property in 10 years’ time and the value has risen to £300,000, then you would need to repay £60,000 (20% of the property’s sale value) to the equity loan. Your share of the sale proceeds would be £240,000 (80% of the sale value) from which you would repay any outstanding mortgage balance.