Want to get onto the property ladder? Read on about Help To Buy mortgages...
WHAT YOU NEED TO KNOW ABOUT HELP TO BUY!
Help to buy can be confusing and hard to get your head round. Who pays what? When do you have to pay it back? What do you have to pay back? How much can you borrow? Who is entitled to Help to Buy?
WHAT IS HELP TO BUY AND HOW DOES IT WORK?
With a Help to Buy: Equity Loan, the Government lends first time homebuyers up to 20% of the cost of the property. This means you'll be able to own a new build property with a 5% cash deposit. Then you'd get a 75% mortgage to make up the rest.
However, there are some limitations to be aware of:
- The scheme is only available on new build properties.
- The loan is interest-free for the first five years, however you will be charged a £1 admin fee every month.
- Interest becomes payable on the loan from year 6 at 1.75% which then rises each year by the consumer prices index plus 2%.
WHAT IF YOU MOVE OR WANT TO PAY BACK THE LOAN?
The loan can be paid back at any point or upon the sale of your home - the loan term is 25 years.
When selling your first home, the HTB equity loan needs to be repaid.
FACTS ABOUT REPAYMENT:
It's important to note that you repay the percentage you borrowed but based on the current value of the property – this means if your property increases in value, you will have to pay back more than was originally borrowed on the loan.
In order to repay the loan there are additional costs… around £500 for surveys and admin charges, plus additional costs to the solicitor for the work involved in repaying the loan. These are all things to think about before considering applying for a HTB loan.
There are many benefits to the HTB scheme and many factors to take advice on, but it can be a useful tool to help you get onto the property ladder.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.