Help to Buy - All You Need to Know
The Government backed Help to Buy scheme is for both first time buyers and existing home owners, allowing you to buy a new home with only a 5% deposit. It is available on homes worth less than ￡600,000 (￡300,000 in Wales). The current scheme will run until April 2021.
This scheme is perfect for…
First time buyers struggling to raise a large deposit to purchase their first home.
It is also ideal for existing homeowners looking for more space, as you could secure a more expensive property as you will only require a 5 % deposit.
How it Works?
You need as little as 5% deposit, the Government then lends you up to 20% of the property value (interest-free for the first five years). Which will give you access to cheaper mortgage products, as you will only need to borrow 75% of the value from the lender.
So if you buy a home for ￡200,000 under the equity loan scheme, you pay ￡10,000 (5%) and get a mortgage for ￡150,000 (75%). The Government loans you the final ￡40,000 (20%).
How Does the Interest Work?
For the first five years the loan is completely interest free. After this point you will start to pay a small amount of interest on the original loan amount. The rate from year six is 1.75%, though it rises each subsequent year by the rate of inflation.
When Do I Pay the Loan Back?
This must be repaid when the house is sold or at the end of your mortgage term – whichever comes first. The Government will take 20% of the sale price, whether higher or lower in monetary terms than the amount lent. You can also pay back some or all of your equity loan without selling your home if you are in a position to do so, which will reduce the interest you pay on the loan each year.
Note - This scheme will be discontinued in April 2021 and replaced by a scheme with stricter criteria. The new version will last until March 2023 – it will only be open to first-time buyers and include lower, regional property price caps.
If you would like any more information please feel free to get in touch.
https://www.alderleyedgepropertymarket.com