Help To Buy

What You Need To Know About The Help To Buy Scheme

One of the government schemes to help people buy their own home is the aptly named Help to Buy scheme. This scheme is for first time home buyers and will allow them to secure a property with just 5% deposit. If you are thinking of using this scheme, you should know as much about it as possible before you start.
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How Does The Scheme Work?

The Help to Buy scheme will offer first time home buyers and equity loan. This loan will essentially be the government lending money to the buyer to purchase the house. It is important to note that this scheme will not work for everyone and you need to be aware of the limitations.

You will not be able to apply for this scheme if you are looking at buying a property to rent out or if you are buying a second home. You will also only be able to take out a repayment mortgage when you use this scheme. The property that you want to buy cannot be valued at more than the set limits for the scheme.

The National Differences

The Help to Buy scheme will differ depending on the part of the UK that you are buying in. If you are buying in England including Birmingham, the scheme will apply to homes with a value of up to £600,000. However, if you are in Wales, the maximum value of the property will be £300,000.

If you are buying in Scotland, the maximum threshold will depend on the value of the property and when you have completed the application. An application completed before March 2017 will have a maximum limit of £230,000. If you are buying in Northern Ireland, you need to be aware that there are different equity loan schemes in place.

How The Equity Loans Work

As this scheme works on the government providing an equity loan, you need to understand how these loans work. You will need to have at least 5% of the sale price of the house as a deposit before you apply for the scheme. The government will then lend you up to 20% of the sale price.

The rest of the sale price will have to be procured from a mortgage lender. The loan you get from the lender will have to be paid back on a repayment basis. Other types of loans will not qualify for this scheme and you will not be able to get the 20% from the government.

The equity loan will not have any interest or fees charged on it for the first 5 years. From the sixth year, you will have to pay interest of 1.75%. Each year after this, the fee will increase in line with inflation plus 1% each year. If you sell the house, you will need to repay the equity loan plus a share of any increase in the value of the property.

The Help to Buy scheme is a good option for any first time home buyers. However, there are certain limitations that you need to be aware of and you need to carefully consider the long-term responsibilities that you will face.
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