Help to Buy - Equity Loan
Part of the Help to Buy mortgage scheme, open to both first-time and home movers, on new build properties up to £600,000
Help to Buy – Equity Loan
How it works
With a Help to Buy equity loan you need to contribute at least 5% of the property price as a deposit. Government will give you a loan for up to 20% of the purchase price. You need a mortgage of up to 75% to cover the rest.Example
For a property worth £200,000Cash Deposit £10,000 5% Equity Loan £40,000 20% Your Mortgage £150,000 75%
Moving on, If this home is sold for £210,000, you get £168,000 (80%, from your mortgage and the cash deposit) and pay back £42,000 on the loan (20%). You would need to pay off your mortgage with your share of the money.
What you need to know about the equity loan fees
You will not be charged loan fees for the first 5 years of owning your home.
In the 6th year, you will be charged a fee of 1.75% of the loans value.
After this, the fee will increase every year. The increase is worked out by using the Retail Prices Index plus 1%.
Your Help to Buy agent will contact you before the fees start, to set up monthly payments with your bank.
You will also be sent a statement about your loan each year.
Fees do not count towards paying back the equity loan.
The home will be in your name, which means you can sell it at any time.
You will have to pay back the equity loan when you sell your home or at the end of your mortgage period - whichever comes first.
You can also pay back some of your equity loan without selling your home.
You can pay back either 10% or 20% or the total amount, so long as the loan is worth at least 10% of the value of your home.
What happens next?
Contact us if you would like to buy a home with an equity loan.
You must buy your home from a registered Help to Buy builder. We have a list of registered builders for you to choose from.
Make sure you can afford a mortgage before you commit. As the loan will be secured against your property, this means if you can't manage the repayments, you may lose your home.