21 Essential Things You Need To Know About The Help to Buy Scheme

You’ve heard about the new Government scheme to help home buyers called Help to Buy.

But, is there anything in the Help to Buy Scheme for you and how do you know if you qualify?

Here are 21 essential things you need to know about how the Help to Buy Scheme works in practice:-

1. The Help to Buy Scheme was introduced in April 2013 and will run for 3 years
2. The Help to Buy Scheme can only be used to buy a new build home up to £600,000.
3. The Help to Buy Scheme does not extend to Second Homes or Buy to Let.
4. From 1^st January 2014 the scheme will be extended to include second hand homes. Full details of the extended scheme have yet to be ironed out.
5. A “Qualifying Buyer” must have at least a 5% deposit with funds for the rest of the purchase by way of a repayment mortgage of 75% with a “Qualifying Lender”
6. The “Qualifying” Buyer can then apply for an “equity loan” from the Government of between 10% and 20% of the purchase price.
7. The loan is called an “Equity Loan” as it will be a share in the ultimate sale price of the property expressed as the percentage rather than a simple return of the actual sum borrowed.
8. An application for a “Equity Loan” is made to the Homes and Communities Agency.
9. The “Equity Loan” will be for a 25 year period and interest free for the first five years. From year six the Equity Loan will be at the rate of 1.75% payable by monthly instalments. There will be a further charge of RPI plus 1% to take into account inflation from year 7 of the Equity Loan.
10. The Equity Loan can be repaid within the 25 year period and must be repaid when the property is sold or remortgaged.
11. The amount payable when the Equity Loan is repaid will be based on the relevant percentage share of the Equity Loan to the market value of he property. If the value of the property has increased so too will the amount of the Equity Loan to be repaid – even where the sum exceeds the original Equity Loan borrowed. If the Property value has decreased, however, so too will the amount of Equity Loan to be repaid.
12. You can pay off chunks of the Equity Loan at any time subject to a minimum payment of 5% of the Equity Loan.
13. The Help to Buy Scheme involves a 4 stage process which begins with contact with the House Builder.
14. After you have chosen the Plot No you wish to purchase, you must then see an Independent Financial Adviser. You must be able to show you have funds to pay reservation fee for the new property, sufficient deposit and sufficient funds to pay all the fees associated with buying a house most notably any stamp duty payable.
15. This first stage includes completing a “Help to Buy Property Information Form” obtained from the Builder which is then forwarded with the reservation form to a “Local HomeBuy Agent”
16. If your purchase is approved and deemed “affordable” by the Local HomeBuy Agent you will receive an “Authority to Proceed” and a special pack to hand over to your Conveyancing Solicitors.
17. You instruct your Conveyancing Solicitors and submit your main mortgage application.
18. Prior to exchange of contracts your Conveyancing Solicitor will confirm that the Help to Buy Equity Loan has been signed and Local HomeBuy Agent issues approval for contracts to be exchanged.
19. On completion the Equity Loan funds will be paid directly to the Builder rather than the buyers solicitors who then transfer the balance of any funds to the Builder.
20. The Buyer’s solicitors confirm completion has taken place to the Local Home Buy Agent
21. The Local HomeBuy Agent registers the Equity Loan at the Land Registry.

So, there you go, over to you.

We would be delighted to help you with your conveyancing on your new home purchase with the Help to Buy Scheme.

Paul Hajek