Help to buy loans have been available to apply for since December of 2020, with the first applicants able to move into their new build properties from April 2021. They are set to run until 31st March 2023 and have already helped hundreds of first-time buyers realise the dream of buying their first home.
Why is it so popular?
With property prices continuing to rise it is getting harder for first-time buyers to get a foot on the property ladder. Many people have turned to this scheme as it offers up to a 20% (40% in London) of the property price as an equity loan that is interest-free for the first five years.
Who is eligible?
If you are wondering if you might be eligible for one of these loans yourself, you will need to meet certain criteria.
Be a first-time buyer purchasing your first residential property.
Buy a new build property.
Comply with government rules for the maximum value of the property (this change depending on whereabouts in the country the property is).
Have a 5% deposit to put down.
Be able to borrow enough money to fund the rest of the purchase.
How does this work in practise?
An example of how this works in practise is as follows:
You find a property you want to purchase for £150,000.
You need to find a deposit of £7,500.
You can borrow up to £30,000 (outside London).
You will need to take out a mortgage of £112,500.
This is dependant on you being able to get a mortgage for this amount. Mortgage borrowing often depends on how much you earn and your credit history. You are not guaranteed a mortgage just because you have applied for this scheme.
The help to buy loan is interest-free for the first five years but you will be charged after this. You will need to repay the loan after a maximum of 25 years.
Do I need to pay for anything else?
You will need to pay a solicitor to process the legal work. Use a licenced conveyancer such as Sam Conveyancing to make the process easier for you. Depending on when you move in, you may have to pay stamp duty. Budget 2021: Stamp duty holiday extended in England and Northern Ireland (moneysavingexpert.com)). However, your solicitor will be able to advise you of this. You may also want to hire a van or a removal company to assist with your move and you will probably need to consider some new furniture so that you have everything you need in your new home.
So many people have successfully applied for an equity loan. Perhaps it is time to try it yourself.