Help to Buy most commonly asked questions!

January 2018

We know the scheme can seem daunting to some people, so we sat with Ben, one of the expert members of the Help to Buy NEYH Team. We have been collecting our most frequently asked questions about the help to buy scheme and he answered them!

Hi Ben, thank you for sitting with us and answering the most commonly asked questions! Hopefully answering these questions will make it easier for people to understand the help to buy scheme. 

What is Help to Buy (Equity Loan)?

Help to Buy Equity Loan is a government backed scheme that helps both first time buyers and existing homeowners buy a new build property. The scheme allows you to take out an equity loan of up to 20% of the Full Purchase Price which is interest free for the first 5 years. The buyer can put in a 5% deposit, take a mortgage out for up to 75% then the remaining amount of 20% will come from the equity loan(subject to the buyer being eligible). The maximum purchase price for Help to Buy is £600,000 and must be your only residence.

How do I apply for Help to Buy?

The first step is to find a property on a New Build site that is offering Help to Buy. Once you have found your perfect home you will need to put down a reservation fee of up to £500. The next step is to fill out a Help to Buy application form and send this across signed along with a copy of your reservation form. You will then be assessed by your local Help to buy agent and receive a decision within 4 working days.

Can I put down more than a 5% deposit when using the Help to Buy scheme?

Yes, a buyer can put in more than a 5% deposit when using Help to Buy meaning they can take less out as a mortgage or a smaller equity loan. The only guideline around this is that a buyer has to take out at least 25% of the Full Purchase Price as a mortgage.

Does the interest I pay after Year 5 get deducted from the overall amount I need to repay back?

The first 5 years of the loan are interest free and only in the 6th year onwards will you start paying the interest on the loan. The interest payments that you make will only be interest payments and they won’t be deducted from the total amount of the loan.

Can I still apply for Help to Buy if I have had poor credit in the past?

Yes, it all depends on whether you are able to take out a mortgage with a lender. The Help to Buy Agent doesn’t do any credit checks just an affordability check on your current situation. All the credit checks will be done with the mortgage lender.

How do I pay off the Equity Loan?

Target are the Post Sales Agents for Help to Buy. When an applicant completes on their property all their information gets passed on to Target. If you are wanting to repay your loan then you will need to speak to them and they will assist you. Their number is 0345 848 0235. This will be the same whether you are either selling the property or just wanting to pay this off.

Can you use you a guarantor when applying for Help to Buy?

No we cannot accept guarantors. We must only be using the income of those living in the property.

Can I sublet/rent my property out when purchasing through Help to Buy?

Only the Ministry of Defence will be able to rent out their home. They must contact the post sales agent who are a company called Target to discuss this.

What happens to my reservation fee if I get declined for Help to Buy?

If an applicant applies for Help to Buy and is declined then they will be eligible to get back the full reservation fee that they put down on the property. This is part of the house builder’s contract with the Homes and Communities Agency.

When I want to pay back the loan, do I pay back the original amount I took out?

When you come to pay off the equity loan you will need to get your property valued. The amount that you will pay back will be a % of the valuation price rather than the original full purchase price.

If you have any questions that haven't been answered, the Help to Buy NEYH team will be taking over our Twitter on Monday 29th January. Use the hashtag #HTBTakeover and ask away!

Thanks for coming along Ben!