Help to Buy – Government Equity Loan
Help to Buy equity loan is a government scheme that aims to help first time buyers purchase a house or apartment with a 5% deposit.
The government offers a loan to buy newly built property at up to 20% of its value or up to 40% if the purchase takes place in London. You have to finance the remaining 75% or 55% in London with a mortgage.
The government loan must be repaid no later than 25 years or earlier if you decide to sell the property before this time.
The loan is repaid in the same proportion as you took it out. So if the government lent you 20%, then you have to give back 20% of the property value at the time of repayment.
You don’t pay any interest for the first 5 years after you get an equity loan. In the sixth year you will have to pay 1.75% of the initial loan amount, and in each subsequent year your interest will increase by an inflation rate + 1%.
- You own 100% of the property.
- You only need a 5% deposit and a lower mortgage, which means you can apply for a purchase faster than you think.
- Mortgage for HTB purchases usually offers lower interest rate than those available on the market with a 5% deposit.
- Due to the purchase of a new property, you should receive a 10-year structural guarantee from the developer
- You have 25 years before you have to pay off the government loan completely.
- The government loan is interest-free for the first 5 years. Theoretically, you may not pay any interest on it at all if you repay it in full before this time, e.g. using a remortgage.
- The Help to Buy program is only available when purchasing newly built houses or flats, and only from developers who are officially registered for the program.
- You cannot buy a house worth more than £ 600k.
- The amount of interest on the government loan is variable and may be higher each year.
- When repaying a government loan you will have to give back 20% (or 40% in London) of the future value of the property at that time.
- It is possible to pay back the loan in part, but the government will accept a minimum of 10% on the value of the property at that time.
- Property prices from the new build market are usually much higher than those from the secondary market.
Are you interested in this scheme or have additional questions? If so, contact our office. It is worth emphasizing that at Prestige Financial Services the initial consultation and affordability check is free and non-obligatory. Our standard fee for assistance with obtaining a mortgage for the purchase of the Help to Buy property is £ 399.
Thanks to us, buying your first property in the UK will be stress-free and your mortgage won’t cost you a fortune.
Do you need help? Call us on 0203-488-1751 or fill out the contact form below and we will call you back.