Help to Buy
The Help to Buy Scheme is a government scheme available to first-time buyers and existing homeowners who want to buy a ‘new build’ house. The purchase price must be no more than £600,000. Under this scheme, you can borrow 20% of the purchase price interest-free for the first five years as long as you have at least a 5% deposit. If you live in London, you can borrow up to 40% of the purchase price. The scheme is available until 2021. The basics of the Scheme are:
- You need at least 5% of the sale price of your new-build flat or house as a deposit.
- The Government will lend you up to 20% of the sale price.
- You borrow the rest (up to 75%) from a mortgage lender, on a repayment basis.
No interest or fees are payable on the Government’s equity loan for the first five years. In the sixth year, you will be charged 1.75%. After that, the fee rises by inflation based on the Retail Prices Index (RPI) plus 1% each year.
Years 1-5: no fees
Year 6: 1.75% of the loan
Year 7 onwards: 1.75% + RPI + 1%
These fees do not go towards paying off the government loan.
When you sell your home, or the mortgage is paid off, you have to repay the equity loan plus a share of any increase in the value.
