Frequently Asked Questions

 

FAQs – Help to Buy Equity Loan

Q. Where does the funding for the Help to Buy Equity Loan come from?

The Help to Buy Equity Loan is funded by the government. If you are eligible, you will be helped to buy with an Equity Loan which is secured as a second charge against your property.

Q. What is the maximum amount of help I can get with the scheme?

The maximum help you can get is 20% of the purchase price. The maximum purchase price for any property under the scheme is £600,000.

Q. Is Help to Buy Equity Loan only available on new build properties or can I choose any property via an estate agent?

Help to Buy Equity Loan is only available on new build properties from participating registered developers. Please check the Property Search for details of Help to Buy Equity Loan properties currently available in the areas covered by Help to Buy South West.

From January 2014 the government will be launching the Help to Buy Mortgage Guarantee Scheme which will give assistance to those starting out on, and moving up, the housing ladder. This will be available on homes for sale on the open market, as well as new properties. For the latest information click on this link www.helptobuy.gov.uk

Q. Will my Equity Loan remain fixed or will I have to pay back more than I originally borrowed?

The Equity Loan is linked to the value of your home, so if its value goes up, the amount you pay back goes up by the same percentage. So, if your property originally cost £200,000 and then went up in value by 10%, the amount you pay back would also go up by 10%. For example:

  • Your home costs £200,000 when you buy it
  • You have a 20% Equity Loan of £40,000
  • Your home is worth £250,000 when you sell it (or redeem your loan)
  • You pay back 20% of £250,000 which is £50,000

Q. I already own a property but it's too small for my family now. Can I buy a bigger property using Help to Buy Equity Loan?

Help to Buy Equity Loan is available to both first time buyers and existing home owners. You will need to sell your existing property when you buy through Help to Buy Equity Loan. Your new home must be your principal residence and you cannot keep your old property and rent it out.

Q. Is there a limit on how much I earn in order to be eligible for Help to Buy Equity Loan?

There is no income cap for people wanting to buy through Help to Buy Equity Loan. You will probably need a 5% deposit for your new home and also be able to cover the costs of moving ie solicitor's fees, removals, stamp duty (if applicable) etc.

Q. I already own a property abroad but I don't want to sell it. Would I still be eligible for Help to Buy Equity Loan to purchase a property in this country?

If you currently own a property, whether in the UK or abroad, you must sell it when you buy your Help to Buy Equity Loan property. In addition you cannot be linked to another property financially. For the avoidance of doubt, married couples own assets jointly and therefore if one owns a property the other is directly linked to the asset and treated as a home owner also.

Q. How can I find out more details on the Help to Buy Equity Loan Scheme?

The Government has produced a comprehensive Buyer's Guide. You can download a copy here.

Q. What happens when I want to move?

When you want to move home, you sell your property on the open market. Your solicitor will liaise with the post sales Help to Buy Agents www.myfirsthome.org.uk so that you pay back your Equity Loan when you complete on the sale. The amount you pay back will be linked to the value of your property at the time you sell.

Q. When must I pay back the equity loan?

The loan must be repaid after 25 years, when your mortgage comes to an end or when you move, whichever occurs first.

Q. Can I pay back the Equity Loan in stages?

Yes, you can start to pay back your Equity Loan any time after completion, in minimum 10% stages. This is also known as 'staircasing'. The amount you pay back will be linked to the value of your property at the time you staircase. The post sales Help to Buy Agency www.myfirsthome.org.uk will be able to assist you with this.

Q. Is my Equity Loan interest free?

You must pay a monthly management fee of £1 per month from the start of the loan until it is repaid. From Year 6 fees of 1.75% will be levied. These fees increase by RPI + 1% each year.

Q. Can I sub-let my Help to Buy Equity Loan property?

You cannot normally sub-let a Help to Buy Equity Loan property without first paying back all of your equity loan. However, if you are a serving member of the Armed Forces and your tour of duty requires you to move away, you may be able to sub-let. In this case, you would need the consent of your mortgage lender.

Q. Can I buy a Help to Buy Equity Loan property off plan?

Yes, you are able to reserve a new home off plan, ie before the property is actually built, up to 9 months before completion. However, you can't exchange contracts earlier than 6 months before completion of the sale. You also need to ensure that your mortgage offer is valid through to completion.

Q. Do I need to complete a Help to Buy South West application form in order to apply for Help to Buy Equity Loan?

You do not need to complete a full Help to Buy South West application form if you only want to apply for Help to Buy Equity Loan. Once you have found a property that you are interested in buying under the scheme (a newly built property from a participating registered housebuilder), you will need to complete a Property Information Form (PIF) and reservation paperwork. You will need to either email these to us at helptobuy@helptobuysw.org.uk or post to us at Help to Buy South West, Unit 11, Brabazon Office Park, Golf Course Lane, Filton, Bristol BS34 7PZ. We will then use these forms to assess your eligibility for the scheme.

The housebuilder that you wish to buy a home from using a Help to Buy Equity Loan may assist you in completing the Property Information Form (PIF) and may send it to us on your behalf.

Q. Can I part exchange my existing home for a Help to Buy Equity Loan home?

No. Part exchange is not available. Housebuilders selling Help to Buy Equity Loan homes cannot offer a part exchange sale.