Help to Buy example

Help to Buy House

Help to Buy

Help to Buy – key details

A number of our clients have asked us how the help to buy scheme will help them to buy following it’s launch this week.

Help to buy scheme – principles

The currently launched phase of the help to buy scheme is designed to assist a buyer of a newly built property to purchase with a limited deposit.

Under the scheme the government provides an equity loan of 20% of the purchase price, and the buyer is expected to contribute a minimum 5% cash deposit.

The remaining 75% of the purchase price can be covered by mortgage.

The equity loan means that the government advances 20% of the purchase price to the builder in the form of a loan to the buyer which is secured on the property.

The help to buy ‘equity loan’ is interest free for the first five-years.
Interest is then charged at 1.75% per annum (rising each year at a rate of RPI plus 1%).

What the help to buy scheme is NOT intended for

The Help to Buy scheme cannot be used for:

  • Purchasing properties that have already been occupied
  • Purchasing properties that are to be let out
  • Buyers who have poor credit records
  • Buyers who cannot prove their income
  • Buyers who cannot afford the mortgage repayments
  • Buyers who do not have sufficient cash for a minimum 5% deposit plus associated costs

Therefore if you have cash for your deposit, are in regular income (employed or self-employed), and have a good credit record you can be considered for the scheme.

Please note: you do not have to be a first time buyer to benefit from the scheme, home movers can also buy a larger (or smaller) property using the scheme.

Help to Buy scheme example

Tom and Anita are looking to buy their first property. They have noticed three bedroom properties being built in their chosen area and available under the help to buy scheme.

The house they would like is priced at £249,995. They have saved £17,500 and have a joint income of £55,000.

The Help to Buy scheme is ideal for them on this purchase.

Purchase price £249,995
Cash Deposit £ 12,500
Stamp Duty Tax £ 2,500
Legal and other purchase costs £ 2,500

Help to Buy equity loan £ 50,000

Balance on mortgage £187,495

Monthly mortgage payment £988

Mortgage figures are a guide based on typical currently available fixed rates

Since Tom and Anita have a houshold income after tax of £3,585, their mortgage is easily affordable at just 27% of that income.

Help to Buy – FAQs

What happens if I want to move?

Your equity loan cannot be transferred to a new home, it will need to be repaid from the proceeds of your sale

Can my parents help with the deposit?

Provided that help comes in the form of a gift, or a loan, that should not be a problem

Can I buy with a friend?

Yes you can

Can I put down a 10% deposit?

You can put down as much deposit as you wish subject to a minimum of 5% of the purchase price

Can I rent out my current home and buy using the scheme?

We have seen nothing to indicate that this is not possible

Can I sell my current home, pay off all my loans and credit cards, and buy under the Help to Buy scheme?

Yes you can

Even if I have got into trouble with credit payments?

No – the mortgage lenders that will take part in this scheme will not accept applicants with poor credit records

Can I use the scheme if I cannot afford to buy on a standard basis?

Under help to buy you will still need to prove your income and prove that you can afford the mortgage payments

Help to Buy – get started

If you would like us to check your eligibility for the home to buy scheme please click below

request a help to buy mortgage now

We can help you:

  • Check you meet basic eligibility for the help to buy scheme
  • Ensure you get a great deal from the builder
  • Get a great mortgage deal
  • Buy without hassle and without stress
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