A useful guide on Help to Buy Schemes
Wednesday, 8th June 2016
There are many different Help to Buy products available to home buyers, and for each scheme and product, legal advisers need to be in place to guide you through the process and documentation with ease.
Here is our guide to the different Help to Buy Schemes.
The Help to Buy Equity Loan
These are for new build properties only. Help to Buy equity loans are open to both first-time buyers and home movers on new-build homes worth up to £600,000. You pay for a new home by putting down a deposit of at least 5% and a mortgage of up to 75%. The remaining amount (to a maximum of 20%) is paid by an Equity Loan from the government to you. The schemes are provided by local HomeBuy Agents.
You will not be able to sub-let your home and so the scheme cannot be used for buy to let properties.
The amount you borrow is calculated as a percentage share in your property and it is this percentage share you pay back. You do not need to repay the Equity Loan until either you sell the property or the end of the term for the equity loan mortgage which is normally 25 years, whichever comes first. When you repay the Equity Loan you pay back a sum equal to the percentage share in your property you originally borrowed. This is based on the value of your property when you sell it and may be more than you originally borrowed.
You will need the help of a Solicitor or Conveyancer to assist you in buying the property and to advise you on the details of the Help to Buy Equity Loan.
The Help to Buy Guarantee Scheme
The Help to Buy mortgage guarantee scheme is intended to help those who have a deposit as low as 5%. These include First Time Buyers, trying to get onto the property ladder, and also includes home movers, needing to move up the ladder to a new home. This is available to buyers of any type of property, so not only new build properties. The mortgage lender provides a mortgage of up to 95% of the property price and the government guarantees up to 20% of this mortgage loan, for example, should the property be repossessed.
This is not available to investors and is not available to properties worth over £600,000. You should discuss this scheme with your mortgage broker or financial advisor who will advise you regarding the products available to you.
The Help to Buy ISA
The latest Government scheme allows first time buyers to save into the ISA and the Government will pay a maximum bonus of £3000 towards the purchase of a property.
The buyer must be a First-Time Buyer who is obtaining a mortgage to purchase the property.
The ISA allows First-Time Buyers to save up to £200 a month and a £50 bonus is then paid for every £200 saved. There is however a minimum bonus payment of £400 so buyers must save at least £1600 to receive the Bonus.
Buyers can have an ISA each so couples will benefit from an ISA each.
The Bonus money can be used towards the purchase of a property up to the value of £250,000 (or £450,000 in London).
There is a set procedure and rules that must be checked by a Conveyancer. The Conveyancer applies to the Government for the Bonus monies and must process this correctly. Again we can help you through the documentation and procedures in place to ensure you can benefit from this scheme.
Forces Help to Buy
This is available to members of the armed forces only. You should seek further advice from your employer regarding this scheme and we can then guide you through the procedure once this is approved.