The Help to Buy Equity Loan scheme is a government scheme that provides first time buyers up to 20% (40% in London) of the property value of a newly built home. Please Note This Content Applies to England Only
Who is Eligible for the Help to Buy Equity Loan Scheme?
You Must be:
- Over the age of 18
- A First Time Buyer
- Able to afford the fees and interest payments
If you have ever owned a home in the UK or abroad you cannot get help from the scheme.
You can apply on your own or with other people and each applicant must meet the eligibility criteria. If you are married, in a civil partnership or cohabiting (and plan on living together), you must make a joint application.
What Property Can I Buy With The Help to Buy Equity Loan Scheme?
The property must be a new build and sold by a help to buy registered builder and the property is to be the only home you own and will live in. You cannot purchase a buy to let property or second home while you still have the equity loan.
There is also a maximum purchase price limit for the home you buy depending on which region it is in:
| Region |
Maximum Purchase Price |
| North East |
£186,100 |
| North West |
£224,400 |
| Yorkshire & Humber |
£228,100 |
| East Midlands |
£261,900 |
| West Midlands |
£225,600 |
| East of England |
£407,400 |
| London |
£600,000 |
| South East |
£437,600 |
| South West |
£349,000 |
How It Works?
You will need to pay a minimum deposit of 5% of the property purchase price and arrange a repayment mortgage of at least 25% of the property price. You can then borrow an equity loan to cover from 5% up to 20% of the property purchase price. If your property is in London you can borrow upto 40%.The equity loan you borrow is interest free for the first 5 years. At the start of the sixth year you will be charged interest at a rate of 1.75%. This will be applied to the amount initially borrowed. This annual interest is spread over the year in monthly payments.
For an example an equity loan of £40,000 (20% of a £200,000 property) will produce an annual interest payment in year 6 of £700 (£58.33 per month)
The interest rate increases every year in April by adding the consumer price index (CPI) plus 2%.
Your Interest payments will decrease if you make a part repayment of the equity loan. This is because of the amount of interest payable will reduce.
Paying the interest and fees does not count towards paying back your loan.
Are There Any Immediate Fees Payable For The Help to Buy Scheme?
From the outset the only fee payable is a management fee of £1 per month. This is payable when you take out the equity loan and until you pay it off.If further down the line you was to remortgage to a new UK bank or Building Society there will be or make an equity loan repayment you will need to pay an administration charge. You could also have mortgage arrangement fees and legal fees payable.
Can I Repay The Equity Loan Early or Will I Ever Need to Repay The Equity Loan?
You can repay the equity loan back at any time. You will need to get a market valuation done on your property by a certified RICS surveyor. The value in the market valuation will determine how much you will need to pay back. For example if you bought the property for £200,000 (borrowing £40,000 – 20%) and the market valuation of the property is now £250,000, you will need to pay back 20% of the £250,000 (£50,000 )You can make partial repayments and a minimum of 10% of the market valuation is required. This will leave the remaining 10% left as a charge on your property which can be repaid at a later date or when the property is sold.
The Equity Loan does need to be repaid and this is if either the house is sold or the end of the Equity Loan Term (Normally 25 years), which ever comes first. You may also be asked to repay the equity loan in full if you do not keep up the terms and conditions of the loan.
