KEY FACTS – HELP TO BUY
- You need at least 5% of the sale price of your new-build flat or house as a deposit.
- The government lends you up to 20% (or 40% if you live in London) of the sale price up to the regional limits.
- You borrow the rest (up to 75%, or 55% if you live in London) from a mortgage lender, on a repayment basis.
- The equity loan is interest-free for five years.
- From year 6, you’ll be charged 1.75% which will increase by the Consumer Price Index (CPI) plus 2% (1% if you took the equity loan before December 2019).
- The equity loan must be repaid after 25 years, or earlier if you sell your home.
- You must repay the same percentage of the proceeds of the sale as the initial equity loan. So, if you received an equity loan for 20% of the purchase price of your home, you must repay 20% of the proceeds of the future sale. That means if the market value of your home rises, so does the amount you owe on your equity loan. If the value of your home falls, the amount you owe on your equity loan falls too.
HOW IT WORKS
The Help to Buy scheme offers an equity loan where the government lends first-time buyers in England money to buy a newly built home.
This must be used to buy your main residence, and can’t be used to buy a second home or a buy-to-let property.
You need a deposit of at least 5% of the purchase price.
You can borrow 20% (40% in London) of the purchase price. This amount is interest-free for five years.
The maximum purchase price for a Help to Buy property depends on what region of England you live in.
You can’t use Help to Buy to buy a property above these limits.
WHO IS ELIGIBLE
The equity loan will be available to all purchasers of newly built homes, not just first time buyers, although it is restricted to a maximum property value of £600,000. All purchasers will also be subject to a Housing & Communities Agency (HCA) affordability check.
HOW MUCH DOES IT COST?
When the interest-free period ends, the interest rates charged on your loan will go up each year in April by the Consumer Price Index (CPI), plus 2%.
Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + CPI + 2% (1% if you took the equity loan before December 2019)
You will also pay a £1 monthly management fee by direct debit. When you take out your equity loan, you agree to repay it in full, plus interest and management fees.