A Helping Hand
Help to Buy is a government-backed equity loan scheme from the Homes and Communities Agency (HCA) for home buyers of new build properties.
The scheme aims to help buyers to purchase a new build home up to the value of £600,000. The HCA was set up to contribute to economic growth by helping communities to realise their aspirations for prosperity and to deliver high-quality affordable housing.
Who Is Eligible?
The scheme is designed to help not only first-time buyers to purchase their first home, but also to support existing homeowners looking to upsize to a new property.
Help to Buy is only available on new build homes.
Help to Buy is available on Duchy Homes properties in England with a selling price of up to £600,000.
Buyers must have a deposit of at least 5% and must take out a repayment mortgage of between 25% and 75% of the full purchase price.
You are not permitted to buy a Help to Buy property with an interest-only mortgage.
If you could reasonably afford more than 90% of the full purchase price, you will not be eligible to receive Help to Buy assistance.
The property purchased must be your only residence and you must not own any other property.
How Does It Work?
With Help to Buy you buy a new home on a new development with assistance from the HCA in the form of an equity loan.
You must take out a repayment mortgage on which you make repayments in the normal way. This mortgage, together with any cash contribution for a house deposit from you, must be a minimum of 80% of the full purchase price. The maximum full purchase price is £600,000.
The HCA will provide an equity loan to fund the balance needed to make up the full purchase price of your home, up to a maximum of 20% of the full purchase price.
You will be the legal owner with 100% title to your home.
How Do I Repay?
The equity loan must be repaid after 25 years, or earlier if you sell your home.
Upon sale of your home, you must repay the Help to Buy contribution from a share of the sale proceeds. The amount you must repay is the same percentage of the proceeds of the sale as the initial equity loan from the HCA (i.e. if you received an equity loan for 20% of the purchase price of your home, upon sale of the home you must repay 20% of the sale price).
The equity loan is interest-free for the first five years, meaning that you will not need to repay any amount of the HCA contribution for the first five years. After that, you will pay a monthly or annual fee of 1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%. The Post Sales HomeBuy Agent will collect your fee by direct debit or standing order. They will contact you at least a month before your fees are due to start, to set up your repayment arrangement.
Following the purchase of your home, you can choose at any time to make voluntary part-repayments (with a minimum part-repayment of 10% of the market value) to reduce the amount you must repay upon the sale of your home, or the amount to be repaid after 25 years.
You can also choose to make a full repayment of the equity loan at any time, so that upon sale of your home you do not need to repay any percentage of the proceeds of the sale.
|Help to Buy Breakdown||£||%|
|New home purchase price||£400,000||100%|
|Deposit (paid by homebuyer)||£20,000||5%|
|Mortgage (arranged by homebuyer)||£300,000||75%|
|Help to Buy equity loan||£80,000||20%|