How Does the Help to Buy Scheme Work?

The Help to Buy scheme can make buying your new home an affordable means of getting on the property ladder. The good news is that you only need a 5% deposit – the government will give you a loan of up to 20% of the cost of the property, or 40% if you are London-based. The equity loan remains interest-free for five years, which is beneficial to young couples and families, and you then need to secure a 75% mortgage. This government loan must be used to buy your main property and cannot be put towards a second home or a buy-to-let. The maximum property purchase price depends upon what area of England you reside in.

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Does the Equity Loan Have to Be Repaid?

One important point worth noting is that the equity loan has to be repaid at the end of the 25 years. If the property is going on the market, the repayment will be earlier. The owner has to repay the same percentage of the funds from the sale as the initial loan. That means if you benefited from the 20% loan, you must repay the same in a future sale. The market value of your property could go up, and this means the amount owed on the equity loan also increases. However, if the value of the property decreases, the amount owed on the loan drops too.

Where Can I Get Help or More Information?

For prospective homeowners seeking information on the help to buy repayment or for those who want to proceed, there is plenty of help available from companies such as According to the FT Adviser, the scheme has lent more than £20bn since its inception in 2013. To the year ending March 31, 2021, over 55,000 households have purchased their home with the help of an equity loan.

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If this is a scheme you think would help you with the ever-rising cost of property, all you have to do is fill in an application form as well as a valuation to show the cost of the property. A solicitor or legal professional must also be on board, and help is available online, or you may wish to speak to friends or family who have benefited from the Help to Buy scheme. You must be aged 18 or over and a first-time buyer, and you must be able to demonstrate that you have the ability to afford the fees and interest payments which will follow. You can apply as a single person or with other people, but all interested parties must meet the eligibility criteria. If you are married or in a civil partnership or cohabiting, then a joint application will be required.

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