Please note: Help to Buy Equity Loan will close to new applications on 31 October 2022.
FEE FREE Help To Buy Equity Loan Mortgage Advice
If you are considering using help to buy to purchase your new build home, you’re in the right place! Alexander Southwell has expert mortgage advisers are well-versed in how to ensure that you get the most suitable help to buy mortgage deal through the scheme.
Contact us today for personalised, FEE FREE, help to buy mortgage advice from our Help To Buy Mortgage Brokers.
So, what is Help to buy and how does it work?
Help to buy is a UK government scheme which aims to help people who are struggling to buy a home to get on the property ladder. Since 2013, the Help to Buy mortgage scheme has enabled over 200,000 people to buy newly built homes who would not have otherwise been able to do so and, using the Help to Buy: Equity Loan, you can also join them.
The first thing to think about is that not all lenders cater to people looking to purchase under the Help to Buy scheme, and those that do will offer specific products for this sector of the market separately from their portfolio of conventional residential mortgages.
The lender will treat you the same as any other potential borrower and make an affordability assessment to determine what level of borrowing is within your budget and ensure that the property and mortgage you are aiming for won’t be too great a financial risk. Uniquely to the Help to Buy scheme, the affordability will also be assessed by your local Help to Buy agent.
Do I qualify for the help to buy scheme?
The help to buy scheme offers an equity loan where the government either lends up to 20% or 40% (For the London help to buy) of the property to first time buyers or homeowners to purchase a newly built home.
There are a few basic points of eligibility you need to meet:
- You must be a first time buyer.
- You must be buying a new build property.
- The price of the property must be under a region dependent maximum price.
- You must not sublet the property.
- You cannot use a part exchange deal for the property.
- The new home must be the only property you own.
- The new home must be in England (slightly different schemes exist in Scotland, Wales and Northern Ireland).
- You need to provide a minimum 5% deposit. This will help first time buyers who don’t have huge amounts of money saved.
Help to Buy equity loan is available to first-time buyers, as long as all the other above criteria are met. These all apply across England, with the only difference for purchasers in Greater London being an increase in the possible value of the Help to Buy loan from 20% to 40%(London help to buy), reflecting the premium house prices in the region.
The maximum purchase price for a Help to Buy property depends on what region of England you live in. You can’t use Help to Buy to purchase a property above these limits.
Region Help to Buy house price caps:
- North East £186,100
- North West £224,400
- Yorkshire and The Humber £228,100
- East Midlands £261,900
- West Midlands £255,600
- East of England £407,400
- London £600,000
- South East £437,600
- South West £349,000
Help To Buy Lenders, Products and Deals
Utilizing the Help to Buy equity loan brings the advantage of competitive interest rates, factoring in both your deposit and the equity loan. A lower Loan to Value (LTV) leads to lower rates, akin to a 25% deposit.
Help to Buy mortgage rates mimic standard mortgages, offering various products with different fees and perks like free valuations and cashbacks. Select the best fit for your situation and loan amount with guidance from our Help to Buy mortgage broker.
Navigating lender participation and unique criteria can be daunting. Our qualified Help to Buy mortgage advisors streamline the process, connecting you with lenders tailored to your needs.
Using help to buy equity loan with a poor credit score or adverse credit
A lot of first time buyers have previously been told that getting a mortgage if you have adverse or poor credit is an impossible task, this is not always the case.
There are some specialist lenders who are more willing to lend and approve a mortgage for borrowers with adverse credit, the type of adverse credit which they will consider are: Defaulted payments, CCJ’s, debt management plans, IVA’s, bankruptcy and late payments
A mortgage adviser’s advice is extremely useful, especially if you have bad credit and need advice on which lenders to turn to for the best chance of approval for a Help to Buy mortgage.
Mainstream lenders lack the specialist knowledge needed to properly assess your Help to Buy mortgage application and often they turn bad credit borrowers.
Other Help To Buy Schemes
Help to Buy: Shared Ownership
An alternative to the equity loan scheme is Shared ownership, it is a scheme that helps people who can’t afford a mortgage on 100% of a property. Shared ownership allows you to buy a share of your home – between 25% and 75% of the home’s value – and pay rent on the remaining share.
You may have the option to buy a bigger share of the home at a later date, this is called staircasing.
Some shared ownership products are designed for specific groups of people:
- Home ownership for people with long-term disabilities(HOLD)
- Older people’s shared ownership (OPSO)
- Rent to Buy (offering homes with rents that approximately 20% cheaper than similar properties on the open market – to help you save for a deposit to purchase a home in the future).
Frequently asked questions: Help To Buy Mortgage Advice
Can Help To Buy Mortgage Brokers enhance my acceptance odds?
Mortgage brokers play a crucial role. They not only compare banks and building societies but also assist in completing the help to buy application, known as the property information form. This form must be accurately filled out before your help to buy agent approves the loan.
What are the Disadvantages of the Government’s Help to Buy scheme?
- If you were to staircase and pay off all or an element of the equity loan, this will be linked to the current property value and may cost you more
- You can only staircase a minimum of 10%
- For the first 5 years you do not pay anything towards the equity loan, however in year six you have to pay the interest at 1.75% and then the rate increases every year after that at the RPI (Retail Prices Index) measure of inflation plus 1% until the loan is paid off. This is on top of the mortgage payments you have to make
- The payments that you make on the equity loan are only interest payments, so the balance is not going down
How do I repay the equity loan?
If you have an help to buy equity loan when you reach the end of the first five years, you’ll have to start paying interest on the equity loan. This will be charged at 1.75% in the sixth year. On a £40,000 Help to Buy loan this equates to £700 a year or £58.33 a month. From the seventh year, this rate will rise annually by the Retail Price Index, plus another 1%.
While there are many lenders who are happy to help buyers purchasing a property using the help to buy equity loan scheme, there are far fewer lenders who help clients remortgage to repay part or their entire equity loan.
The mortgage application is only part of the process as there are additional costs to the housing association and survey fees.
Contact Alexander Southwell and we can talk you through the process of repaying your help to buy equity loan.
What is the definitions of first time buyers? Can I own another property outside the UK?
A first time buyer is someone who does not own, and has never owned, a home anywhere in the UK or the world.
Our help to buy mortgage and protection advisers are based in Hampshire. Our advice and free service covers every county across the UK. Alexander Southwell Mortgage Services is a broker with access to competitive mortgages and their top rates and deals, we are also FEE FREE!
Speak with our team via the phone, video call or WhatsApp. Click here to contact our Help To Buy Mortgage Brokers specialists.
