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HELP TO BUY: MYTH BUSTER

We are often asked about the various Government schemes available to help us on to the property ladder but they are not always easy to understand. We have put together a list of frequently asked questions and answers that will help you better understand the process.

Help to Buy Scheme – Equity Loan

The Government lends you up you 20% of the cost of your home, so you’ll need a 5% cash deposit and a 75% mortgage to make up the rest.

  • You have to be a first-time buyer to use the Help to Buy Scheme.

False: but it does have to be a newly built property.

  • The equity loan is interest free.

True: but only for the first 5 years. If you have not repaid in full your Help to Buy equity loan after 5 years, you will be required to pay an interest fee of 1.75% of the amount of your equity loan at the time you purchased the property, rising annually.

  • I have to pay back the equity loan when I sell my home.

True: you will have to pay back 20% of the value of your home when you sell. If your home is worth less than what you bought it for, you will repay less than the original amount the Government contributed to the original purchase price and vice versa if your home has increased in value.

You can pay off the Help to Buy equity loan before you sell your home with savings and/or additional mortgage finance. This must be a minimum of 10% of your home’s current value.

  • There is a limit on the purchase price if I use the Help to Buy Scheme.

True: the purchase price must be £600,000.00 or less.

  • I must not own another of property at the time I buy my new home.

True: you cannot use the Help to Buy Scheme to purchase a rental property. You must live in your home if you use the Help to Buy Scheme. If you wish you purchase another property, and keep your home you must repay the equity loan before you do this.

  • If I use to Help to Buy Scheme I will not own all of my home.

False:  the Help to Buy Scheme is often confused with Shared Ownership which is a separate Government scheme where you own a percentage of your home. With the Help to Buy Equity Loan scheme you own 100% of your home.

 

Help to Buy – ISA

If you are saving towards buying a home and open a Help to Buy ISA the Government will boost your savings by 25%. So, for every £200.00 you save, you will receive a Government bonus of £50.00. The maximum bonus you can receive is £3,000.00.

  • You have to be a first-time buyer to open a Help to Buy ISA.

True: You are not eligible if you have previous bought/already own a property.

  • I can use my bonus towards my deposit on exchange of contracts.

False: you cannot use your bonus towards your deposit due at exchange because it must be certain that the purchase is going ahead before the bonus is claimed. The bonus is claimed after exchange and can be used towards the balance of the purchase price.

  • I have decided not to buy a house, I will have to forfeit the money in my Help to Buy ISA.

False: You can close the account and withdraw your funds but you will not be able to claim your bonus.

  • I have found a house to buy. I must inform my solicitor of my Help to Buy ISA so they can advise me about how to claim my bonus.

True: You should not simply withdraw your funds but close the account at the branch and provide your solicitor with the closing letter provided to you. Your solicitor will also ask you to sign a first-time buyer’s declaration. These will be used to claim your bonus via the solicitor’s portal and the bonus will be paid directly to your solicitor.

  • I am buying a house with my partner, we can both have a Help to Buy ISA.

True: This means a maximum contribution of £6,000.00 towards your first home together.

  • When I sell my house I will have to repay the bonus.

False: You will not have to repay your bonus in the future.

  • If I am a first-time buyer I will be able to use my bonus, regardless of the purchase price.

False: You can only claim you bonus if you are purchasing for up to £250,000 outside of London or up to £450,000.00 in London.

For further help on matters relating to ‘Help to Buy’, or if you have any other queries about buying a property don’t hesitate to  give our expert Conveyancing team a call on 01284 767766 or email Emily Isted.