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The Help to Buy Equity Loan
The Help to Buy Equity Loan scheme is open to both first time buyers and existing homeowners. There is no income cap for applicants and you can buy a new-build property with a value of up to £600,000. The scheme helps you to buy your home with an equity loan of up to 20% of the full price of the property. You won't have to pay any interest charges on this loan for the first five years and you own 100% of your own home from the start.
How does the Equity Loan work?
You buy 100% of a brand new home from a developer who is registered for the scheme. You fund 80% of the purchase through a combination of a mortgage and your deposit; the remaining 20% is covered by an ‘equity loan’ from the government. This loan is interest free for the first five years. From year six, you’ll start paying a monthly fee on the equity loan. These are fees on the loan, not repayments of the loan itself.
Your mortgage and deposit: You must have a mortgage to be able to buy using the Help to Buy Equity Loan scheme as the equity loan has to be registered as a second charge against the mortgage. You will need a minimum 5% deposit, along with a 75% mortgage, but you can put in a higher deposit to reduce your mortgage if you wish. The minimum mortgage level acceptable under this scheme is 25% of the full purchase price.
When we receive your Help to Buy Equity Loan application, we will check the documents to make sure they’re fully completed. It's important that you can sustain your purchase financially and are not over-stretching yourself so we will check to make sure you meet the Homes and Communities Agency’s (HCA) sustainability criteria.
Click on the link to access the HCA' s Equity Loan affordability calculator: Help to Buy EL calculator FINAL Nov 15.xls [xls] 120KB
Click on the link for Equity Loan calculator guidance: Equity Loan calculator guidance - Nov 15 v2.pdf [pdf] 457KB
How do I find a Help to Buy Equity Loan property?
Help to Buy Equity Loan properties are available from participating registered developers. Properties up to a value of £600,000 can be included in the scheme. You can find details of registered developers offering Help to Buy properties across the midlands here or through our online property search.
How do I apply for Help to Buy Equity Loan?
When you have found a suitable property (which will need to be a newly built property from a participating developer) you will need to follow these steps:
- Fill in a Property Information Form (PIF). You can download one here or get a copy from a registered developer
- For hints and tips on how to fill the PIF in click here
- Complete the relevant reservation paperwork (usually called a ‘Reservation Form’) with the developer - make sure you both sign and date the form
- Submit both forms to Help to Buy Midlands by emailing them to us at firstname.lastname@example.org (or post to us at Help to Buy Midlands, Garden Court, Harry Weston Road, Binley, Coventry CV3 2SU).
When we receive your forms, we will check them to make sure they’re fully completed. It’s important that you can sustain your purchase financially and are not over-stretching yourself so we will check to make sure you meet the Homes and Communities Agency’s sustainability criteria. Once these checks are completed, and provided your purchase meets sustainability criteria, you will be issued with an Authority to Proceed (ATP) document. Please do not apply for a mortgage prior to receiving this document.
Your Authority to Proceed will then outline the next steps – please make sure you read the Help to Buy Buyers Guide Aug15.pdf[pdf] 279KB as this contains a lot of important information about the scheme.
- At present part exchange is not available on the Help to Buy Equity Loan scheme
- You cannot own two properties at the same time under the Help to Buy Equity Loan scheme
- You will need to be able to get a mortgage to buy through the Help to Buy Equity Loan scheme
Repaying your Equity Loan
You can repay your Help to Buy Equity Loan any time up to 25 years after you took it out. If you haven’t paid it back before, you must pay it back after 25 years. If you move, you will need to repay your loan at that point. You cannot transfer an existing loan to a new property. If you redeem your mortgage, the equity loan will have to be paid back at the same time.
The amount you repay is linked to the value of your property. If you took out a 20% equity loan, the amount you pay back will be 20% of the current value of your property. So if the value of your homes goes up, the amount you pay back, also goes up. If the value of your home goes down, the amount you pay back also goes down, so you are protected if property prices fall after you buy.
Your Help to Buy Equity Loan will be interest free for the first five years; from year six a fee of 1.75% applies which increases annually by RPI plus 1%. Please note that these payments are a fee on the loan – they are not repayments of the loan itself.
Equity Loan Customer Stories
Hear from some of our customers who have got on the property ladder with Help to Buy Equity Loan:
I am a developer wishing to register for Help to Buy Equity Loan funding
If you are not already signed up for funding, you can find the registration document and submission forms at Homes and Communities website.
Developers can contact the HCA regarding Help to Buy at email@example.com. Please note this e-mail address is only for developers with queries relating to Help to Buy Equity Loan, not for general enquiries.
For guidance on developer participation please read this report.