• Article by
  • Sarah Liddle
  • 23 October 2018

All things Help to Buy

Welcome to our home wall plaqueIn recent years, the Government has introduced two schemes to help purchasers progress in the property market.

Help to Buy ISAs were introduced to help boost a first time buyer’s savings pot. Individuals who meet certain criteria are able to claim a bonus from the Government towards the dreaded lump sum deposit that so many struggle to obtain. The Help to Buy Equity Loan Scheme was also introduced to go a step further and provide a less demanding loan of up to 20% of the full purchase price. Buyers then only require a 75% mortgage and 5% cash deposit.

Both schemes are explored further below.

Help to Buy ISAs

Help to Buy ISAs are available at a wide range of banks and building society. It is worth shopping around as different providers can provide competitive interests rates on your savings. Every ISA however can provide a bonus of 25% on your final closing balance.

Upon opening the ISA an initial deposit of up to £1200 can be made within the first month. A standing order is then set up to transfer a maximum of £200 a month into the account. The maximum bonus that could be received is £3,000 on a saving of £12,000. It is also good to know that ISAs are per individual and not per household. Therefore if you and a partner each open an ISA a maximum of £6,000 could be claimed to assist with your purchase.

There are a number of conditions that must be complied with to be eligible for the bonus. You must be a first time buyer and not ever have acquired an interest in land, whether this be leasehold or freehold, anywhere in the world. You must be a resident of the UK and you must occupy the property you intend to purchase as your main residence. You will be required to sign a First Time Buyer Declaration to this effect that your solicitor will need to forward to Help to Buy. You must also have at least £1,600 in the account as the minimum bonus payable is £400.00.

Once your solicitor has advised that you are at an appropriate stage you will need to close your ISA account. The money held in the ISA is then returned to your current account and your Solicitors will apply online to Help to Buy to request the bonus in readiness for completion.

Your bonus must be used towards your deposit and in turn sent to the seller’s solicitor as part of the purchase monies – this cannot be transferred directly to you but will of course reduce the final balance required from you.

Help to Buy Equity Loan

Help to Buy Equity Loans are an initiative set up especially for New Build properties to help you move on to or up the housing ladder. The Government will lend up to 20% of the cost of a new-build home. There are no payments required on the 20% loan in the first 5 years of ownership. After 5 years, single yearly payments or monthly instalments can be made. This then allows buyers to concentrate on their normal mortgage payments.

Again, there are certain criteria that must be met to qualify for the loan. You can check your eligibility status online and Help to Buy have set up a number of local agents to provide assistance with the application and further information specific to your situation. Most mortgage advisors can also provide help and guidance with the Help to Buy application, alongside the normal lender’s mortgage application.

The Help to Buy loan allows individuals to purchase a new build house that would normally be beyond their affordability. The loan is not just for first time buyers, it is also available for current home owners. However, you cannot own another property; the property cannot be sublet to anyone else and it must not be more than £600,000. You will own the property 100% and will be solely responsible for its upkeep and maintenance. There are similar schemes in place for Scotland, Wales and Northern Ireland.

Once your application is successful, an Authority to Proceed will be sent to your allocated solicitor along with a copy of the Equity Loan Agreement and Mortgage Deed for signing. Your solicitor will then be in direct contact with Help to Buy and will request the required funds are set up in readiness for completion of your new build property.

For further information contact Witney Tully on 01785 223440 or email witney.tully@orj.co.uk