In this second instalment of looking at the help available to first time buyers we assess the new help to buy scheme: Equity Loans.
If you are a first time buyer and you are looking to buy a new build than this is the scheme for you.
With an equity loan the Government will lend you 20% of the cost of your new build home (from 2016 this will be 40% in London). You then need to have enough capital for a 5% deposit, the stamp duty land tax for the full purchase price of the property (check SDLT here) and legal and other professional fees. A mortgage will then be used for the final 75% of the cost of the property.
The Governments equity loan won’t incur any fees or charged for the first 5 years. Thereafter a Government help-to-buy agent will contact you to arrange the cost of borrowing fees going forward with you.
If you were at any stage to sell the property the Government would be re-paid 20% of the sale price (even if this is more than the purchase price) to clear the loan.
The benefit of this scheme is that you own 100% of the property. Furthermore you will be able to get a more affordable mortgage as you have a bigger deposit and the money that you do borrow from the Government is initially cost free. Finally you will have a new build property which comes with guarantees on all fittings and fixtures, giving you piece of mind that your property won’t fall apart!
The Help to Buy website provides you with a search tool for finding these properties. Perhaps the only disappointing thing with this scheme, is that there is not many properties available at the moment – however I would suggest that if you are in any way interested in this then you register your interest with your local Help to Buy Agent and they should send you available properties as they near the end of the development pipeline.
Obviously, as with all the help to buy schemes, you cannot already own a property, buy a second property or rent out your property. This home must be your only home and if your situation changes then you will have to re-pay your loan and if you are not honest about it this could be seen as fraudulent and could incur a criminal charge.
However if you are a genuine first time buyer and it is a new build you are after then you have absolutely nothing to loose with applying for this scheme.
If you need more information then go and check out the Help to Buy website. Also keep checking NC Real Estate and our Facebook page for more information on help for First Time Buyers and other property matters.
NC
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