Help to Buy in the CPCA
What do I need to know about Help to Buy?
Help to Buy offers an alternative route onto the property ladder for potential purchasers in the Cambridgeshire and Peterborough Combined Authority who can’t quite afford to buy a home outright.
Help to Buy – Explained
Help to Buy aims to help first time buyers by providing an equity loan of up to 20% of the value of a new build property. The government provides this 20% loan, which means that the buyer is only required to raise a 5% deposit with a 75% mortgage making up the rest.
The Help to Buy equity loan makes buying a home more accessible to some purchasers by reducing the amount required for the deposit, especially when compared to buying a property on the open market. As the loan boosts your deposit, it can also help buyers secure better mortgage rates from lenders and means that they wouldn’t need to take out a costly 95% mortgage.
Help to Buy – Eligibility Criteria
The general eligibility criteria for Help to Buy is as follows:
- You will need to be at least 18 years old.
- You must be a first time buyer, meaning that you have never owned another property either in the UK or abroad. If you are purchasing a property with another person, you must both meet the definition of a first time buyer to benefit from the scheme.
- You will require at least a 5% deposit of the purchase price of the property.
- You must be able to fund at least 80% (60% in London) of the purchase through a combination of deposit and mortgage.
- You will only be able to purchase a new build home, and the value of the property cannot exceed the relevant regional price limits – for example, £407,400 in the East of England.
- You will need to be able to prove that you can afford the repayments and other outgoings related to buy a home.
The regional price caps for Help to Buy are as follows:
- London: £600,000
- South East: £437,600
- East of England: £407,400
- South West: £349,000
- East Midlands: £261,900
- West Midlands: £255,600
- Yorkshire and the Humber: £228,100
- North West: £224,400
- North East: £186,100
Please also note:
- There is no maximum household income.
- You must live as an owner-occupier in your home and therefore cannot sub-let the property.
- Part Exchange is not available through this scheme.
- Help to Buy ISAs are no longer available as of November 2019, however if you opened an ISA account before the end date, you can still use your savings towards buying a Help to Buy home.
- If down the line you chose to move to London instead, please note that the equity loan is boosted to 40% in the capital due to higher price points. In turn, London Help to Buy would mean that you would still require a 5% deposit but with a 55% mortgage make up the rest.
Help to Buy – Costs Breakdown
If you bought a Help to Buy home within the CPCA region worth £250,000, the costs would be as follows:
- £50,000 equity loan from the government.
- £12,500 deposit put down by yourself as the buyer.
- £187,500 mortgage from a mortgage lender.
Help to Buy – Repayments
During the first five years, the Help to Buy equity loan will be interest fee – you will only be required to pay a monthly management fee of around £1 during this time. After the first five years are up, the owner will pay an annual fee of 1.75% on the amount of the loan that is still outstanding, however this fee will increase every year with inflation (Retail Price Index (RPI) + 1%.
Depending on which comes first, you will be required to pay back the equity loan either when you sell the property or at the end of your mortgage period.
If you’re looking to sell your Help to Buy home, you would need to repay the equity loan percentage that’s still outstanding.
For example, if you had originally bought 80% of the property and hadn’t repaid any of the loan off yet, the repayment on selling would be 20% of the current market value. As way of a breakdown, this would mean:
- You took the 20% equity loan to buy a home worth £250,000 – equalling £50,000.
- Upon selling your home, it’s valued at £300,000.
- You would repay 20% of the current market value of your home (not on the amount you originally borrowed) which would equate to £60,000.
- Similarly, if the property value drops in price, you would pay less than you originally borrowed.
You could also choose to pay back some of the loan without selling the home. You will need to pay back either 10% or 20% of the total amount, as long as the loan is worth at least 10% of the value of your property.
Help to Buy – Available Homes
The Help to Buy equity loan is only available on specific developments where Homes England have an agreement with the relevant housebuilder/provider. Varied property types will be available depending on the area where you’re looking to buy including both houses and apartments.
However, you will need to note the following:
- Help to Buy is only available on new build properties, you cannot buy a resale home.
- The value of the property you are purchasing cannot exceed the relevant regional price limit – in the East of England, that will be £407,400.
- You may need to pay Stamp Duty Land Tax when purchasing your property.
For more information about the equity loan and to see if it’s the right home-buying option for you, check out our Help to Buy Pros & Cons. If you’d like to start your search for a Help to Buy home in the CPCA region, you can do so via our property portal today!