Property Booking FAQs & Guides to Help to Buy

What is Help to Buy?

Help to Buy is an equity loan scheme to help you buy a new home. If you have a 5% deposit and can cover 75% of the value of the home with a mortgage (or 55% in London), the Government will lend you up to the remaining 20% (40% in London) in the form of an equity loan.

How is London Help to Buy different?

If you are looking to buy a home in London with Help to Buy, you will still need a minimum 5% deposit based on the full market value of the home, however you may only need to raise a mortgage for 55% of the value, with the remaining 40% being the Help to Buy equity loan.

Outside of London, you will need a 5% deposit, 75% mortgage and receive up to a 20% equity loan.

What type and size of home can I buy?

The home must be a new property and the value cannot exceed £600,000, but with regards to location, number of bedrooms or style, you’re free to pick! Help to Buy is available on any home that meets the above criteria and the developer selling the home has funding available to offer the equity loan, rather than on specific plots like shared ownership.

Do I have to buy a new build home?

Yes, Help to Buy is only available on new build properties and developments.

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Do I have to borrow the whole 20% loan (40% in London) available to me?

No, if you can afford to buy the home with a smaller loan borrowed then you are able to do so. You will need to borrow a minimum 5% equity loan to be eligible for the scheme.

Can I sublet my home if I buy with Help to Buy?

Unfortunately no. The scheme is available to help people buy a new home who could not have afforded to do so otherwise, therefore the home you buy must be lived in by you.

If, for example, a friend moves in the spare room, as long as there is no formal rental contract in place and you can afford to buy the home without their additional income of rent, this would usually be ok.

Can I use Help to Buy to purchase a shared ownership home?

No,  Help to Buy and shared ownership are two different schemes that cannot be combined.

Can I use Help to Buy to purchase a Buy to Let home?

No, Help to Buy is designed to assist those to buy a new home that could not have afforded to do so otherwise, therefore cannot be used for Buy to Let purposes.

I’m an existing home owner; can I use Help to Buy?

Yes, but only if you are selling your currently owned home can use Help to Buy to purchase a new home.

Can I take my loan with me to buy a new property in the future?

Unfortunately not. If or when you want to buy a new home in the future, your existing equity loan will be paid off via the sale of the property. If Help to Buy is available when this time comes, you may be able to apply for a new loan at that time, but this will be subject to the criteria of the scheme at that time.

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What deposit do I need?

The minimum deposit required to buy with Help to Buy is 5% of the full market value, however if you have more to put towards your purchase, you could take out a smaller mortgage, or borrow a smaller Help to Buy equity loan.

What is a Help to Buy mortgage?

With Help to Buy you must take a minimum mortgage of 25% of the value of the home. This is because the Help to Buy equity loan you borrow must sit as a ‘second charge’ on the property, therefore a mortgage must sit as a ‘first charge’.

What other costs do I need to consider?

Unlike Shared Ownership, you will need to cover the Stamp Duty costs at purchase, as well as other standard purchasing fees such as mortgage arrangement costs, solicitors fees and valuation fees.

Ongoing monthly costs will include utility bills, Council Tax and TV license for example, and depending on the home you buy, you may have monthly service charges.

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How do I apply for Help to Buy?

To buy a home with Help to Buy, simply visit the developers’ show home or marketing suite at the development you wish to buy at. The sales team will guide you through the process of applying for the loan, which will include an initial affordability assessment that will be approved, or declined, by the Help to Buy Agent. This assessment will be carried out by an independent financial advisor, however they need to ensure the purchase is affordable for you both now, and when the interest is applicable on the loan.

How can I find out where Help to Buy properties are available?

Look out for the Help to Buy logo! You’ll often see it on new build developments and this is a sure way to know if the scheme is available. Online, check out developer websites or portals like Property Booking to check out which developments are offering Help to Buy.

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Do I get charged any interest on the loan?

The Help to Buy equity loan is interest free for the first 5 years. As of year 6, an interest rate of 1.75% plus RPI at the time will be charged and you will need to pay this on a monthly basis. The interest you pay will be based on the value of the loan you borrowed at the time of buying your home.

You will need to consider and plan for the additional monthly costs, alongside your mortgage and any potential service charges, and the post-sales agent will contact you with a few months notice before the interest needs to be paid.

What are my responsibilities in the home once I move in?

You are considered 100% owner if you buy a home with Help to Buy, therefore you are completely free to decorate as you wish. There are some home improvements, such as extensions or other structural changes to the property, that you will need to get permission for via the post-sales agent.

What happens when I want to sell?

Unlike Shared Ownership, no company or organisation owns the 20% (40% in loan) that you didn’t buy with a deposit and mortgage, therefore you will need to sell your home via a more traditional route of an estate agent.

You will need to notify the post-sales agent of when you are selling as they will need to approve certain aspects of the sale, including the valuation of your home.

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How long do I have before I have to pay off the equity loan?

The equity loan is interest free for the first 5 years, however you will typically have 25 years (or for however many years you took out your mortgage for, up to a maximum of 25 years) to pay back the loan.

For example, if you took out a mortgage term of 25 years, you will have 25 years to pay back the loan. If your mortgage is to be paid off within 20 years, you will have just 20 years to pay back the loan, however if you borrow your mortgage over 30 years, you will have the maximum period of 25 years to pay back, or ‘redeem’ the equity loan.

How do I redeem my Help to Buy equity loan?

The loan can be paid back in full either on sale of the property, or in ‘chunks’ of 10% at a time. You cannot pay off part of the loan monthly, for example, as you would with a credit card.

A Help to Buy post-sales agent will process the transaction for you, in the same way that a Help to Buy Agent helped with the initial purchase. Their details can be found here.

Fees will be applicable but the post-sales agent will provide information on this.

How much do I pay back when I redeem my equity loan?

Help to Buy enables you to borrow a percentage of the value of a new home, not a specific monetary amount, therefore if the value of the home has increased when you come to redeem part of all of the loan, you will pay back the same percentage but based on the current value.

For example, if you buy a new home for £300,000, you will borrow a 20% equity loan of £60,000. If the value increases to £350,000 when you come to pay the loan back, you will be paying back £70,000, however the 80% of the financial contribution you put towards the home via a deposit and mortgage will still benefit from the increase in equity:

80% contribution of £300,000 = £240,000

80% contribution of £350,000 = £280,000

Can I pay off the Help to Buy equity loan within the interest free period?

Yes! If you can afford to pay back, or redeem, the loan with the 5 year interest-free period, you are able to do this.

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