Amy Story Purchasing Her First New Build Home
Help to Buy – Equity Loan
You will be appointed with your own mortgage adviser to explain the most appropriate solution. We will liaise with the relevant agencies to apply for help to buy, once we received the authority to proceed we will apply for your mortgage, keeping all parties informed throughout the process, and yes this service is completely free of charge.
The first part of the Help to Buy scheme which launched in 2013 and is available until 2020 is the Equity Loan scheme.
You can borrow up to 20% of the value of a newbuild from the government, interest-free for the first five years. This means you need a 5% deposit and must take out a mortgage to cover the remaining cost of the property (75%).
After the interest period ends, you will be charged a fee of 1.75% of the Help to Buy loan’s value. (Note: this fee will increase at a rate of 1% of that figure annually, plus any increase in inflation). In short, the 25% deposit will give you better access to more competitive mortgage rates.
Borrowers must also pay back the government loan when they sell the property or at the end of the mortgage period.
You can pay off the equity loan at anytime, without a penalty. But if you don’t repay it while you’re living in the property, the government will take back its stake in your home at its current value.
Facts about the Equity Loan scheme:
- It only applies to properties worth less than £600,000
- There is no maximum income requirement
- The property must be your only residence
- The scheme cannot be used for purchasing a buy-to-let property
The Help to Buy ISA
The ISA aims to help those saving to buy their first home. The government will boost your savings by 25% which means for every £200 you save, you receive £50 from the government. (Note: the maximum government bonus you can receive is £3,000 and to obtain that you need to have saved £12,000). The ISA can be used for any property costing under £250,000.
Also, it is an individual product which means the accounts are available to each first-time buyer so a couple could receive a government bonus of up to £6,000, for example.
There may be a fee for mortgage advice, the precise amount will depend on your circumstances but we estimate that it will be £299. We do not charge a fee for our services for New Build Homes; we receive commission from the provider.