If you are buying a new-build property there are a number of things to consider. One is whether you qualify for and would like to take advantage of the Government’s Help to Buy (Equity Loan) Scheme. The Scheme has been in place since April 2013 and is open to purchasers of new-build properties up to a value of £600,000 in England. You do not need to be a first-time buyer to apply. Catie Edwards, TSP Chartered Legal Executive, specialises in the purchase of new-build properties and Help to Buy applications. Here she gives some headline details about the scheme.
- The government has appointed Homes England (formerly the Homes and Communities Agency) to administer the scheme
- A purchaser must contribute at least 5% of the purchase price, the mortgage lender at least 25% and Homes England a maximum of 20% (or 40% if the property is in London). So outside of London the minimum total percentage to be covered by the purchaser and the mortgage lender combined is 60%, and outside of London 80%
- From completion of the purchase, the purchaser must pay Homes England a monthly management fee of £1, through to the property being sold (or the loan otherwise being repaid)
- No interest is payable for the first five years of the loan. After the initial five year period the purchaser must pay Homes England interest on the amount of the outstanding loan, initially at the rate of 1.75% and then rising annually by the amount of the rise (if any) in the Retail Prices Index plus 1%. The interest is payable by 12 equal monthly payments each year
- The Scheme is open to first-time buyers and to those who have previously owned property, although the property must be the borrower’s only property and sole residence. The mortgage must be conducted on a capital repayment basis. This means the balance is repayable during the term of the mortgage, not just the interest
- If the purchaser wishes they can pay off parts of the loan. The minimum amount which can be repaid at any one time is 10% of the market value of the property at the time of partial repayment The loan must be repaid in full after 25 years or on an earlier sale of the property
- When a purchaser comes to sell the property or to pay off the loan, the amount repayable to Homes England will be calculated on the valuation of the property at that time, or on the actual sale price if that is greater. If the purchaser bought the property for £200,000 in 2014 with a 20% equity loan of £40,000 but the property is valued at £240,000 in 2018 when the purchaser wishes to sell the property, than, assuming no partial repayments have been made in the meantime, the sum of £48,000 (i.e. 20% of the 2018 valuation) would be repayable to Homes England (or 20% of the actual sale price if the property is sold for more than the current market value)
- If structural alterations or extensions are to be carried out the purchaser would need the written consent of Homes England.
More information can be found here.
Catie can be contacted on 01255 254258 or by email at firstname.lastname@example.org