Have you got your sights set on a beautiful property, yet you cannot afford the asking price? There’s nothing more frustrating. You find your dream home, but it’s just out of your reach. Well, don’t give up yet, as we will tell all about another option available to you – Help to Buy.
What is the Help to Buy scheme?
This is a government scheme that is designed to help hard-working people get on the property ladder or move up it. This is something that is becoming more and more difficult nowadays, yet with the Help to Buy scheme you have a way to acquire your dream property. Under this scheme, you can buy a property that is worth up to £600,000 with as little as a five per cent deposit. You will get 100 per cent ownership of the property yet you will only require a small despite as well as 20 per cent loan and 75 per cent mortgage. So, if your dream house is worth £450,000, you may be able to purchase it with a deposit of £22,500, a loan of £90,000 and a mortgage of £337,500. Please note that you are still going to need to cover the cost of property surveyors, legal fees, removal expenses, and everything else associated with the purchase.
Paying back the loan
You will receive an equity loan from the government, and you will need to pay this back on a monthly basis. For the first five years of property ownership, you won’t be charged any loan fees. However, in the sixth year, you are charged a fee, which is 1.75 per cent of the value of the loan, and this does not count to repaying the equity loan. This money won’t randomly start coming out of your bank account once you get to the sixth year, as you will be contacted by your Help to Buy agent beforehand so you can contact your bank to set up the monthly payments. Once the sixth year has passed, the loan fee charged will increase year on year, which is calculated based on the Retail Prices Index with an addition of one per cent.
You have 25 years to pay back the loan unless you sell your property. If you put your home on the market, you will have to repay the loan as soon as it sells. The amount you repay depends on the market value of your property at the time you repay the money you have borrowed. For example, if you purchased a home for £300,000 yet it was valued at £350,000 25 years later, you will need to pay back £70,000 despite the fact that you borrowed £60,000. You can make loan repayments at any time, yet you will need to make a minimum of 10 per cent of your home’s market value per payment.
To conclude, if you have found a property you wish to purchase yet you cannot afford the deposit amount, why not look into the Help to Buy scheme? You will only need to make a small deposit, and you will benefit from a government loan that is fee-free for the first five years.
We’re very proud to bring you this feature in association with Prinsegate Chartered Surveyors. For more property-related advice, please pay a visit to our interiors page.