The Help to Buy Scheme Explained

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Focusing on a new build property is another choice available to homebuyers - such as prioritising a detached property, townhouse, cottage or perhaps a bungalow. And, whereas some prefer to opt for period features or character charm in a second hand home, there is also the new build route – a blank canvas to put your own mark on it.

Weighing up the pros and cons of both is the best way to decide which route to take and here are some advantages if you decide to buy a new build.

HELP TO BUY SCHEMES

There are various Help To Buy schemes available to you. Help to Buy is a government initiative that’s helping first-time buyers and those moving home buy a brand-new home with just a 5% deposit. As long as the property you want to buy is a new-build home valued at less than £600,000, you could qualify for the scheme.

We’ll talk you through our lenders’ criteria and find the right product for you so you can start looking for your perfect home with absolute confidence and peace of mind.

NO CHAIN

This can be a very attractive reason to choose a new build home – removing a sometimes-stressful element of moving property. Alleviating the chain means you stay in control and won’t be at the mercy of other buyers and the house is ready to move into!

PERSONAL TOUCH

The property will be untouched by any previous owners, leaving you with a blank canvas to work with and style up as your own.

10-YEARS, GUARANTEED!

New build homes come with a 10-year protected warranty, so if anything went wrong, you’re covered for up to 10 years. This, obviously, isn’t the case when you built a ‘second hand’ home.

ECO-FRIENDLY

The day to day running of a household can be quite expensive once you’ve broken it down by electricity, water rates, heating etc. All new builds are built to the latest building standards, which includes water-saving sysstems, low CO2 emmissions, double-glazed windows, energy efficient boilers and insulation. New builds will be cheaper to run and maintain and the common sense approach to take.

EXCELLENT QUALITY

New build houses are built to an excellent quality, from the new fixtures and fittings to lightweight trusses in the roof, double glazed windows and insulated walls. The builders also work closely with local planners and the Environmental Agency to ensure they are creating a development that isn’t at risk of flooding.

To speak to one of our Mortgage & Protection Advisers that specialises in new build, please call us on 08454 500200, visit www.chartersfinancialservices.co.uk or email hello@chartersfinancialservices.co.uk.

How much does Help to Buy cost?

The Help to Buy: Equity Loan scheme is a government backed initiative to help get first time buyers onto the property ladder.

The scheme is designed to be more affordable for first time buyers, as you only need least a 5% deposit for your new home. The government will lend you up to 20% of the value of the property (40% in London) and you’ll need to take out a mortgage for the remaining 75% (55% in London).

Each month you’ll make repayments on both your Help to Buy loan and your mortgage. Here’s an illustration of what you would pay on the Help to Buy initiative each month:

  • Purchase price: £310,000
  • Less deposit: £15,500
  • Help to Buy equity loan: £62,000
  • Mortgage: £232,500
  • Your monthly repayment: £806.87*

*This illustration represents a capital repayment mortgage over a 30-year term on a two-year fixed rate of 1.54% with a £999 arrangement fee and a free basic mortgage valuation. Example rates vary daily so this illustration does not constitute an offer and any mortgage is subject to full underwriting, affordability and credit scoring via the lender. Both this rate and the product were valid at the time of writing.

Don't forget, there are solicitors fees, moving fees and protection costs that you need to budget for too!

Remember that a mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

If you want to find out more about Help to Buy or would like to know if you’re eligible for a Help to Buy: Equity Loan, contact our expert mortgage advisers and we’ll talk you through your options. Call us on 08454 500200 or click here to get in touch.

The new Help to Buy Equity Loan: here’s what you need to know

Are you considering using the Help to Buy Equity Loan scheme to buy a home? Then it’s essential you know all the details...

What are Help to Buy Equity Loans?

Launched by the government in 2013, Help to Buy Equity Loans are aimed at helping those who are struggling to get on the property ladder.

There are different Equity Loan schemes for England, Greater LondonWales and Scotland, and they all vary slightly.

In a nutshell, with the Help to Buy Equity Loan scheme:

  • The government will lend you up to 20% of the cost of your new build home. This increases to up to 40% of the cost if the property is in London. This is called an equity loan.
  • You’ll need to save a minimum of 5% of the purchase price as a deposit, and you can use contributions from your Help to Buy ISA or Lifetime ISA to pay this. The remaining 75% comes from a specialist Help to Buy mortgage product.
  • As you’ll have a larger deposit, you won’t need to raise as much of a mortgage. This means your initial mortgage payments will be lower. It should also help with affordability calculations when you apply for your mortgage.
  • The equity loan is interest-free for the first five years and you don’t need to make any repayments on it during that time.
  • The current scheme is open to first time buyers and existing home owners. It’s also only available on new build homes, up to a maximum purchase price of £600,000.

What are the specifics of the Help to Buy Equity Loan scheme?

• Only first time buyers will be able to use the new Help to Buy Equity Loan scheme.
• New regional price caps will be introduced. As a result, the maximum value of homes that can be bought with the scheme's help will be dramatically cut in most areas. The caps have been set at 1.5 times the average first time buyer price in each region (as of Autumn 2018).

What are the regional price caps?

Region Price Cap
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

 

What are my other options?

While Help to Buy has been popular with first time buyers, it’s not the only route available if you have a small deposit.

  • 95% mortgages: The average rates on mortgages that require just a 5% deposit have reduced significantly in recent years. This has made them considerably cheaper. And unlike with the Help to Buy Equity Loan scheme, you won’t be restricted to new build properties. However, as James explains above, you may struggle to get a high loan to value mortgage on a new build property.
  • Shared Ownership: Also known as ‘part buy, part rent’, this scheme allows you to buy a share of a property and pay rent on the rest. And as you'll only need a mortgage for the share you’re purchasing, you'll need a much smaller deposit than if you were buying the home outright. Find out more about Shared Ownership here.
  • Guarantor mortgages: This is when a parent or close family member uses their own property or savings as security against your loan. This means lenders may accept a smaller deposit than usual and sometimes they won’t require any deposit at all.

 

For more information about the Help to Buy Equity Loan, feel free to get in touch with our friendly team of mortgage advisers.

First class service from Stephanie. Saw us at very short notice and was very personable and helpful! Would highly recommend. Many thanks, Lucy & Kev

Lucy C

August 2020

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