The Property Magazine New Homes Autumn 2018

FINANCE NEWS
Find out if
a Help to
Buy equity
loan can
help you
buy your
dream new
home!
What is a Help to Buy equity loan?
The help to buy equity loan scheme was launched
in April 2013 in a bid to kick-start the UK property
market and make it easier for people with smaller
deposits to buy their first home or move up the
property ladder.
The scheme is currently available on newbuild
properties until 2021 so you can still take
advantage. You will need to put down a minimum
5% deposit and the government with provide you
with an equity loan of up to 20% (40% in London)
of the property value meaning you will need a
mortgage for the remaining 75% of the property
value.
So, if you were buying a new-build house for
£300,000 with the minimum 5% deposit you
would need:
• Deposit: £15,000
• Equity Loan: £60,000
• Mortgage Amount: £225,000
One of the key benefits to using an equity loan
is that you only need a mortgage for 75% of the
purchase price which means you have access to
better interest rates, instead of 95% mortgages
where they are limited in supply and the interest
rates are higher.
Are you eligible for an equity loan?
The eligibility criteria for an equity loan is very
straight-forward, you must;
• Have a minimum 5% deposit
• Be looking to buy a new-build of up to £600,000
• Live in the property as your main residence and
not own any other property
How do you repay your equity
loan?
You do not pay a penny of interest on the equity
loan in the first five years making home ownership
much more affordable.
After five years you repay the interest each
month which starts at 1.75% and increases in
line with inflation plus 1% each year. The interest
payments are paid alongside the monthly mortgage
payments. Remember, you are only paying the
interest each month so the equity loan size will not
reduce unless you take steps to repay the capital.
I would recommend you speak with your
mortgage broker before the end of the
interest free period to discuss re-mortgaging
as an alternative option to paying the interest
each month.
You must repay the equity loan in full if you decide
to sell or when your mortgage term ends (typically
25 years), whichever is sooner. At this point you
must pay back the percentage borrowed from the
government regardless if this is higher or lower than
the original amount borrowed.
If you have not made any provisions to repay
the equity loan at the end of the mortgage term
(typically 25 years) then you may need to sell your
home.
Help to Buy equity loan in
numbers
• 158,883 legal completions from April 2013 –
December 2017
• £8.27bn worth of equity loans issued from April
– December 2017
• 81% are first time buyers
• £52,026 average equity loan amount from April
2013 – December 2017
(Figures provided by Homes England)
If you are interested in buying
a new-build property then an
equity loan is worth considering.
To apply for a help to buy equity
loan mortgage, speak with help
to buy recommended mortgage
broker IMS on 01869-248339 or
mortgages@imsinternet.co.uk
WWW.IMSINTERNET.CO.UK
MORTGAGES@IMSINTERNET.CO.UK
01869 248 339
Article by
Thomas Honour
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