Launched in 2013, the Help to Buy scheme has helped thousands of people across the country to purchase a home. Getting onto the property ladder is notoriously difficult but the government-initiative has made homeownership more accessible and affordable.
Of course, every person who investigates the scheme will have a number of questions regarding Help To Buy and how it works. Below we’ve shared some of the most frequently asked questions which our Leon House team hear regularly from buyers.
Who is eligible for Help To Buy?
The current scheme – coming to an end in April 2021 – is available to first time buyers as well as previous home owners. There are no rules regarding household income, all you need is a minimum of a 5% deposit and be looking to buy a new build home which is officially registered through the Help To Buy scheme.
How does Help To Buy work?
The national Help To Buy: Equity Loan scheme involves the government lending buyers up to 40% of the cost of a new home, so that only a 5% cash deposit is required to secure a mortgage. This has made buying a property – usually for the first time – much more accessible for many people as the considerable deposit upfront is often the stumbling block.
Is Help To Buy the same everywhere?
No. The government scheme is available to buyers in England, Scotland and Wales but the property values differ from region to region. Typically in England, the government lends you up to 20% of the value of your home, but this drops to 15% in Scotland and increases to 40% in London. This equates to a 55% mortgage for buyers in London.
In real terms, this system means London buyers only need £30,000 (their 5% deposit) to secure a home worth £600,000 (the maximum Help To Buy London value) – 40% of the property value will be provided by an equity loan and the rest will be made up of the 55% mortgage from a bank or building society. Of course, the lower the property value, the lower the deposit required. Find out more about how the scheme works by taking a look at our Help To Buy guide as well as having a play with our Help To Buy calculator.
Didn’t Help To Buy end last year?
No, but it’s no surprise that there is some confusion around this. The Help To Buy Loan Equity Scheme (buying a Help To Buy property) is different to the Help To Buy ISA which has now been replaced by the Lifetime ISA. The Help To Buy ISA was designed to help buyers save before buying a property. The money saved through this ISA could be used towards any property on the open market, not just Help To Buy properties. While they sound extremely similar, these were completely separate initiatives; you could take part in both, just one or neither.
When is Help To Buy changing?
Help To Buy as is currently stands will be coming to an end next year. The scheme won’t end completely until 2023, but from April 2021 the initiative will be for first-time buyers only and regional house value caps will also come into play across the UK. London buyers won’t be impacted by the introduction of caps however, as the upper limit for lending on Help To Buy homes in London will remain at £600,000.
When can I pay off the loan?
While you have 25 years to pay off the loan in full (or earlier if you sell your home) you can pay this off as soon as you want, or are able to. Some people aim to pay off a greater percentage of the loan before the end of the first 5 years, as repayments during this period are interest free. In the sixth year, you will start to pay interest at a rate of 1.75%.
What happens when I sell my home?
When you come to sell your Help to Buy property, you will repay the equity loan as part of this transaction. This means that, depending on how much you have borrowed and paid off already, you would repay up to 40% of the home’s value at the time you sell.
Where can I find a Help To Buy property?
If you’re looking for a one or two bedroom property within easy reach of central London then look further than Leon House. Slap bang in the middle of thriving Croydon, the redeveloped brutalist building is perfect for buyers seeking affordable luxury and convenience in one.
Get in touch with our team to book a viewing today and find out more about what Help To Buy could offer you.