The latest phase of this government scheme began in 1st April 2021 and will completely close in March 2023. The government loan is dedicated to first time buyers in England, buying a newly built home from a homebuilder registered with the Help to Buy: Equity Loan Scheme. The minimum that can be borrowed is 5%, up to a maximum of 20%, (40% in London) of the full purchase price of a newly built home. Buyers must pay a minimum of 5% deposit when purchasing a property and use the Help to Buy mortgage to fund the remaining cost. Also on that date the amount you pay for a home, depends on where in England you buy it. Each region has a different equity loan price cap as shown below:
Region | Maximum property price
North East £186,100
West Midlands £255,600
East of England £407,400
South East £437,600
South West £349,000
The equity loan that is borrowed is interest only, so you do not reduce the amount owed. When you take out your equity loan, you agree to repay it in full at the end of loan term, plus interest and management fees. However buyers do not pay interest for the first 5 years, only a management fee of £1 is paid monthly by Direct Debit. Interest payments of 1.75% along with £1 management fee begin in year 6 onwards. After the sixth year the interest on the equity loan will increase by the Consumer Price Index (CPI) plus 2% (1% if you took the equity loan before December 2019).
The percentage you borrow is based on the market value of your home when you buy it and the amount you pay back is worked out as a percentage of the market value when you choose to repay. The equity loan must be repaid after 25 years, or earlier if you sell your home. There is an option to repay all or part of the equity loan at any time. If the buyer is wanting to make a part payment this must be at least 10% of what the home is worth at the time of the repayment. If the value of the house falls, the amount that you owe on your loan will drop too, however if the market value is to rise so does the amount you owe.
To find out more or if you would like to talk to one of our qualified advisers please click here to email us or call us on 0800 999 3637.