Share to Buy Expert Sessions: Your questions about Help to Buy
Help to Buy
What is the Help to Buy equity loan?arrow_downward
Help to Buy is a government backed scheme, and the Help to Buy equity loan enables purchasers to buy a new build home with the help of an equity loan, also known as shared equity.
The government provides a loan of up to 20% of the home (or 40% in Greater London), so the purchaser only needs to raise a 5% deposit, with a 75% mortgage (or 55% in Greater London) making up the rest. Find out more about Help to Buy here.
What is the deposit on a Help to Buy home?arrow_downward
For a Help to Buy home, the deposit will be at least 5% of the full value of the home – for example, a 5% deposit of a home costing £500,000 would be £25,000.
However, as the equity loan counts towards your deposit, you may be able to take out a mortgage where you might otherwise struggle; this also means that you don’t have to take out a costly 95% mortgage. You can see a further breakdown of the Help to Buy costs here.
What is the eligibility criteria for Help to Buy?arrow_downward
There are some specific eligibility criteria you would need to meet to be able to purchase a Help to Buy home:
- You must be at least 18 years old.
- You have at least 5% deposit of the full purchase price.
- You must be able take out a mortgage for 25% or more of the full purchase price.
- You are able to prove that you can afford the mortgage repayments and other outgoings on the home you wish to buy.
- You do not already own a home, or you will have sold your current property before or at the point of completion on your Help to Buy home.
Is there an age limit to buy?arrow_downward
You must be at least 18 years old to be eligible to get a mortgage and buy a home.
What is the difference between Help to Buy and Shared Ownership?arrow_downward
Help to Buy is a government backed scheme, and the Help to Buy equity loan enables purchasers to buy a new build home with the help of an equity loan, also known as shared equity. The government provides a loan of up to 20% of the home (or 40% in Greater London), so the purchaser only needs to raise a 5% deposit, with a 75% mortgage (or 55% in Greater London) making up the rest.
Shared Ownership on the other hand (also referred to as part buy/part rent), allows buyers to purchase a share of a home – usually between 25% and 75%. Purchasers will pay a mortgage on the share that they own, and a below-market-value rent on the remainder to a housing association.
Can Help to Buy be used in conjunction with Shared Ownership?arrow_downward
No – Help to Buy and Shared Ownership are two different home-buying schemes that can’t be used in conjunction with one another. For more information about the two schemes and how they differ, visit our Shared Ownership vs Help to Buy page.
Can I buy a resale home through Help to Buy or is it only available on news builds?arrow_downward
Help to Buy is only available on developments where Homes England have a registration agreement with the housebuilder. The equity loan is only available on new-build houses and apartments and you cannot buy a home that is on the market for more than £600,000.
How is Help to Buy different inside and outside of London?arrow_downward
If buying outside of London, the government provides a loan of up to 20% of the home so the purchaser only needs to raise a 5% deposit, with a 75% mortgage making up the rest.
To reflect the higher property prices in the capital, the upper limit of the loan was raised from 20% to 40%. With London Help to Buy, the government provides a 40% loan with the buyer still only needing raise a 5% deposit, but with a 55% mortgage making up the rest.
What is the interest rate on Help to Buy after the five year interest free period?arrow_downward
Response from Censeo Financial – In year six you will pay 1.75% of the equity loan amount, split equally between the 12 months of the year. After that the figure will increase by RPI +1%.
So on a £240,000 equity loan – which is the maximum you can be given in London – the payment in year six will be £350. In year seven, if the RPI is 3%, then the payment would go up by 4% and would be £364.
Is it necessary to have a mortgage on a Help to Buy home?arrow_downward
Response from Censeo Financial – No. You do not need to take a mortgage on a Help to Buy property, as long as you can pay the rest with your deposit. If you can get a mortgage then it may be better for you to take a lower equity loan. However, you will need to speak with an adviser in order to work out which option is best for you.
Is it easier to obtain a mortgage with Help to Buy or Shared Ownership?arrow_downward
Response from Censeo Financial – If you are eligible and you have the affordability, then there is no difference in difficulty between obtaining a mortgage on a Shared Ownership home or a Help to Buy property.
I have loans, a credit card and overdraft. Will I still be able to buy through Shared Ownership?arrow_downward
Response from Censeo Financial – It will depend on the size of those loans and credit cards, because they will come into play in terms of working out affordability. However, it will not completely rule you out.
What do I need to repay if I sell my Help to Buy home?arrow_downward
You will have to pay back the Help to Buy equity loan when you sell your home or at the end of your mortgage period – whichever comes first. If you haven’t repaid the loan by the time you come to sell the property, the government will reclaim its percentage stake in your home at its current value.
For example, if you buy using the 20% Help to Buy equity loan, you will pay back 20% of the sale price of your home to the government when you sell. The seller would also need to pay off their mortgage with their share of the money.
You’ll need to obtain an independent valuation prior to sale to determine the amount to be repaid. You can find out more about selling a Help to Buy home here.