FAQs - Help to Buy Equity Loan
Where does the funding for the Help to Buy equity loan come from?
Help to Buy is funded by the government. If you are eligible, you will be helped to buy with an equity loan which is secured as a second charge against your property.
What is the maximum amount of help I can get with the scheme?
The maximum help you can get is 20% of the purchase price. (40% in London) The maximum purchase price for any property under the scheme is £600,000.
Is Help to Buy only available on new build properties or can I choose any property via an estate agent?
Help to Buy Equity Loan is only available on new build properties from participating developers.
Will my equity loan remained fixed or will I have to pay back more than I originally borrowed?
Equity Loans are linked to the value of your home, so if its value goes up, the amount you pay back goes up by the same percentage. So, if your property originally cost £200,000 and then goes up in value by 10%, the amount you pay back would also go up by 10%. For example:
- Your home costs £200,000 when you buy it
- You have a 20% equity loan of £40,000
- Your home is worth £250,000 when you sell it, (or redeem your loan)
- You pay back 20% of £250,000 which is £50,000
I already own a property but it’s too small for my family now. Can I buy a bigger property using Help to Buy Equity Loan?
Yes, the Help to Buy equity loan is available to both first time buyers and existing homeowners. You will need to sell your existing property when you buy through Help to Buy. Your new home must be your principal residence and you cannot keep your old property and rent it out.
Is there a limit on how much I earn in order to be eligible for Help to Buy?
There is no income cap for people wanting to buy through Help to Buy. You will probably need a 5% deposit for your new home and will also need to be able to cover the costs of moving ie solicitors fees, removals, stamp duty (if applicable) etc.
I already own a property abroad but I don’t want to sell it. Would I still be eligible for Help to Buy Equity Loan to purchase a property in this country?
If you currently own a property, whether in the UK or abroad, you must sell it when you buy your Help to Buy property – you cannot own two properties under this scheme.
How can I find out the more details of the Help to Buy Scheme?
The government has produced a comprehensive Help to Buy Buyers' Guide. You can download a copy here: Help to Buy Buyers Guide Feb 2018 FINAL.pdf [pdf] 410KB
What happens when I want to move?
When you want to move home, you sell your property on the open market. Your solicitor will liaise with the Help to Buy Mortgage Administrator, Target HCA www.myfirsthome.org.uk so that you pay back your equity loan when you complete on the sale. The amount you pay back will be linked to the value of your property at the time you sell.
Can I pay back the equity loan before the end of the first five years?
Yes, following the purchase you can choose at any time to make voluntary part repayments or a full repayment, based on the market value at that time. The minimum voluntary repayment is 10% of the market value at the time of repayment.
The Help to Buy Mortgage Administrator, Target HCA, will be able to assist you with this. You can contact them here.
Is my equity loan interest free?
You will not have to pay any interest on your equity loan for the first five years after purchase. From year 6 a monthly fee of 1.75% will be levied. This fee will increase by RPI + 1% every year.
In addition, from the day you purchase your new home you will pay a monthly management fee of £1 which continues until the equity loan is repaid.
Can I sub-let my Help to Buy property?
You cannot normally sub-let a Help to Buy property without first paying back all your equity loan.
However, if you are a serving member of the Armed Forces and your tour of duty requires you to move away, you may be able to sub-let. In this case, you would need to get the agreement of your mortgage lender and the Help to Buy Mortgage Administrator, Target HCA, ( www.myfirsthome.org.uk).
Can I buy a Help to Buy property off plan?
Yes, you are able to reserve a new home off plan, ie before the property is actually built, up to 9 months before completion. However, you cannot exchange contracts earlier than 6 months before completion of the sale. You also need to ensure that your mortgage offer is valid through to completion.
Do I need to complete a Help to Buy Midlands application form in order to apply for Help to Buy Equity Loan?
You do not need to complete a Help to Buy Midlands application form if you only want to apply for Help to Buy Equity Loan. Once you have found a property that you are interested in buying under the scheme (a newly built property from a participating developer), you should complete the developer’s Reservation Form and a Help to Buy Property Information Form and these will then be passed to us to signify your intention to apply. We will use these forms to assess your eligibility for the scheme.
Do the fees payable from year 6 act as repayments on my equity loan?
The fees you pay from year 6 are not repayments of your loan. You can opt to repay all or part of your equity loan at any point, but your loan will not be paid off by your fee payments.
Can I part exchange my existing property if I buy through Help to Buy Equity Loan?
Part exchange is not allowed if you buy using a Help to Buy Equity Loan.
Can I go directly to a mortgage lender to arrange my mortgage rather than using a Financial Advisor or Mortgage Broker?
You can go directly to the mortgage lender if you prefer but you may get more support throughout the process if you use a financial advisor or mortgage broker who is familiar with the Help to Buy Equity Loan.
When do I have to repay my equity loan?
You will have to repay the loan when you sell your home or when you have repaid your mortgage in full or 25 years after you took the loan out, whichever is sooner.