There is no doubt that the Government’s Help to Buy Scheme is promoting a great deal of activity in new home sales, although its effect on the remainder of the local housing market remains to be seen. This is of course only the start, as Help to Buy will be extended to other properties in the New Year. So, what does it consist of?
Help to Buy Equity Loans are open to both first time buyers and other home movers on new build homes worth up to £600,000.00. The properties must be purchased as a residence for the buyer so they cannot be used as a “buy to let”.
With the Help to Buy Equity Loan you will need to contribute at least 5% of the property price as a deposit and the Government will give you a loan for up to 20% of the price which they will pay directly to the developer. You will therefore, need a mortgage of up to 75% to cover the remainder of the purchase price.
You will not be charged loan fees for the first five years of owning your home. But in the 6th year you will be charged a fee of 1.75% of the loan value. After this the fee will increase every year by using the retail price index plus 1%.
Because this is an Equity Loan and not a normal mortgage, the amount repayable to the Government when you sell the property is dependent upon its market value when you sell and the proportion of the loan granted e.g. 20%. If the house has gone down in value then the Government receives proportionately less. However if the price has increased then the Government will receive more. It is also possible to pay back some of the Equity Loan prior to selling your property subject to specific rules.
Most builders are keen to promote the scheme but it is a complicated concept involving substantial administrative work. It sounds too good to be true but you should proceed with care taking all factors into account. So if you would like some further information on the legal aspects then contact Mark Ollier on 01297 626950 or by email on email@example.com or ask at any of our offices