The Help to Buy scheme is a government scheme to help first-time buyers get on the property ladder with just a 5% deposit. You can borrow 20% of the purchase price (40% in London), interest-free for five years. This scheme opens to new applications from 16 December 2020 and will run until 31 March 2023. There are certain conditions and restrictions attached to the scheme and in this article, help to buy scheme solicitors, we take a look at the process and mechanism involved.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you with the legal aspects of the help to buy scheme, get in touch with us today. We will review your situation and keep you regularly updated, discussing progress in a clear and approachable manner. Early expert legal assistance ensures no mistakes are made and also avoids the stress of dealing with these matters on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.
Can anyone apply under the scheme?
You can only apply for a loan under the scheme if you are classed as a first-time buyer. This definition is quite specific and only applies to
- Someone who has previously never owned a property at any point in the past.
- Someone who’s never done so whether in the UK or abroad.
- If you’re buying with a partner, they have to be a first-time buyer too.
Are there limits to the size of the loan?
As property prices can vary quite dramatically throughout the country, the maximum size of the loan will also depend upon where the property is located. Below is a list of the maximum loan size throughout the country:
South East: £437,600
East of England: £407,400
South West: £349,000
East Midlands: £261,900
West Midlands: £255,600
Yorkshire and The Humber: £228,100
North West: £224,400
North East: £186,100
Is the loan available to all types of property?
You can only apply for a help to buy loan on new build property and only if the developer is registered for the scheme with the government.
Do I have to pay a deposit?
To qualify for an equity loan you’ll need a deposit of at least 5% of the property you hope to buy.
With the equity loan, you can borrow up to 20% of the property’s value (40% in London). What the equity loan is doing is essentially ‘topping up’ your deposit – the aim being to give you access to cheaper mortgage rates. It is essential to remember that whatever you borrow with an equity loan will be separate from your actual mortgage. In effect, you’ll be taking out two separate loan agreements. It is also possible to put down a larger deposit than 5% and still receive the 20% loan from the government.
What are the terms of the loan?
The loan will be completely interest-free for the first five years. There will be a monthly management fee to pay (currently £1). After five years, you’ll start being charged interest on it and interest is only charged on the original amount you borrow.
The initial rate in year six is 1.75% and then it then increases every April by the Consumer Prices Index (CPI) measure of inflation plus 2%, until the loan is paid off.
Is there anything else to consider?
It should be remembered that the government will basically own 20% of your property until you pay off your loan. This may not at first appear to be anything to worry about but you need to consider the implications of movements in property prices. If prices go up, the government’s 20% means you will have to pay back more than the original loan amount. If property prices fall, you will never pay less than the original loan amount. The government wins in both cases.
How we can help
We have a proven track-record of helping clients purchasing a property using the help to buy scheme. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Residential Property Solicitors
It is important for you to be well informed about the issues and obstacles you may face during the transaction. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Residential Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.