Help to Buy is a government scheme which can help first time home buyers get a property with just a 5% deposit. It has become increasingly popular in recent years as a means of helping first time buyers onto the property ladder amidst a climate of difficult lending conditions. At Go Convey, we are experienced in handling purchases made with assistance from the Help to Buy Scheme and have helped our clients successfully navigate the system.
How the Help to Buy Scheme works
- You need at least 5% of the purchase price of your new-build flat or house as a deposit.
- The government lends you up to 20% of the purchase price.
- You borrow the rest (up to 75%) from a mortgage lender, on a repayment basis.
The interest rate you will be charged
You don’t pay any interest or fees on the government’s equity loan for the first five years. In the sixth year, you’ll be charged 1.75%.
After that, the fee rises by inflation based on the Retail Prices Index (RPI) plus 1% each year.
RPI figures are put together by the Office for National Statistics.
See below for an example of how the fees work.
Interest rates for paying back your loan
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.
Help to Buy ISAs
If you are saving to buy your first home, you can save money into a Help to Buy ISA and the Government will boost your savings by 25%. So, for every £200 you save, you receive a government bonus of £50. The maximum government bonus you can receive is £3,000. – See more at: https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/#sthash.qmS5SBfk.dpuf
We are approved to deal with Help to Buy ISA’s and as part of the process of buying your first home we can apply for the Help to Buy bonus on your behalf. Please contact us should you wish to discuss your Help to Buy ISA.