Struggling to get your head around all the Help to Buy schemes available? Well, you’re in luck. Here’s a quick overview of the Help to Buy purchasing schemes designed to get you onto the ladder.
Help to Buy Equity Loan Scheme
This government-backed scheme offers both first-time buyers and existing homeowners the option to take out a loan of up to 20% of the cost of their newly built home. This means that buyers will only need a 5% cash deposit, and a 75% mortgage to make up the rest. What’s more, you won’t be charged loan fees on the 20% loan for the first five years of owning the home.
Let’s take an example
If the purchase price of your new home is £200,000, here’s how the equity loan scheme would work:
The loan is interest-free for the first five years, and in the sixth year, you’ll be charged interest at a rate of 1.75%. When you sell your home, or the mortgage is paid off, you will have to repay the equity loan plus a share of any increase in value.
There are a few circumstances in which you can’t apply for the Help to Buy Equity Loan scheme. For example:
• You can’t use the above schemes to buy a second home or a property to rent out.
• If you use Help to Buy, you can only take out a repayment mortgage.
• You can’t buy a property for more than the set price limits (see below).
Help to Buy Shared Ownership
There are a few circumstances in which you can’t purchase a home via the Shared Ownership scheme. For example:
• If your household earns more than £80,000 per year.
• If you are able to purchase a home on the open market which suits your needs.
And… there you have it!