Are you a first-time buyer, tired of paying rent, who can afford mortgage payments but cannot afford a deposit of more than 5%? Or do you already own a home but feel trapped because the value of your home has not increased, so you can afford only a 5% deposit on your next place? Now could be a great time to get on the property ladder and own your first home or make your next move, contact us today to see how Help to Buy could help.

Equity Loan Scheme​

For home-buyers, the Help to Buy Equity Loan scheme is for people who wish to purchase a new build property when they cannot afford one in their area because of lack of income and insufficient deposit. These include first-time buyers who are trying to get on the property ladder, and ‘second-movers’, needing to move up the ladder to a bigger home. * These loans are not available for Buy-to-Let landlords or second homeowners.

Who is it for?

Home-buyers who wish to purchase a new build property when they cannot otherwise afford one in their area because they have an insufficient combination of the income and deposit needed to secure the level of mortgage required. These include first-time buyers who are trying to get onto the property ladder, and ‘second-movers’, needing to move up the ladder to a bigger home. These loans are not available for Buy-to-Let landlords or second home owners.

Who is eligible – and for what types of property?

Existing homeowners and first-time buyers. Buyers with a minimum deposit of 5% of the purchase price. Buyers who are borrowing from a participating lender. Available in England on new build properties worth up to £600,000, up to £400,000 in Scotland and £300,000 for the version in Wales. Properties available for the scheme include residential properties. Your only property, so you cannot have an interest in any other property.

How does it work?

You will need to put down a deposit of at least 5% of the property price. The government will give you an equity loan for up to 20%, interest-free, for the first five years, and you will need a mortgage of 75% to cover the rest. As a result of providing you with this assistance, the government is entitled to its money back, plus a share in the future sale proceeds equal to the percentage contribution it made to assist your purchase. This type of loan is known as a ‘shared equity’ mortgage.
Example: If a home in the scenario above sold for £250,000, making a £50,000 ‘profit’, you’d get £200,000 (£150,000 from your mortgage, £10,000 cash deposit back and £40,000 as 80% share of the ‘profit’) and pay back £50,000 to the government (the £40,000 equity loan, plus an extra £10,000 as 20% share of the ‘profit’). You’d need to pay off your mortgage with your share of the money.

When will I have to pay back the equity loan?

The home will be in your name, which means you can sell it at any time. However, you will have to pay back the equity loan when you sell your home or at the end of your mortgage term – whichever comes first. Please see above an example of how much you might have to pay. You can also pay back the equity loan without selling your home. If you do this the minimum repayment is 10% of the current value of the property at the time of repayment. There is additional useful information on the Money Advice Service website.