How does the Government's Help to Buy scheme work?

Our property lawyer Fiona McNulty answers your questions
Question: My fiancé and I are getting married next year and we are struggling to save for a deposit to buy a home. My friend has said it is possible to get a loan from the Government. Is this right? Can you give us some details?

Answer: The Government recently introduced a scheme called Help to Buy, with the aim of helping buyers purchase a new property funded by a mortgage, a small deposit from the buyers themselves and the rest of the deposit underwritten by the Homes and Communities Agency.

This scheme is not limited to first-time buyers but is limited to newly built homes, the purchase price of which does not exceed £600,000. Help to Buy — Equity Loan homes are available from developers in England registered to offer them. The companies usually advertise that they have Help to Buy homes available on their
developments.

You need a minimum deposit of five per cent and you must be able to satisfy your mortgage lender’s criteria. The Homes and Communities Agency will lend you up to
20 per cent of the purchase price by way of an equity loan. For the first five years of your Help to Buy home ownership you pay nothing on the equity loan but you will, of course, pay your own mortgage lender in the usual way.

In year six, a fee of 1.75 per cent is payable on the equity loan and this fee will rise annually in accordance with the Retail Prices Index. The property will be registered in your name and the equity loan must be paid back to the Homes and Communities Agency when you sell the place, or at the end of your mortgage period. Or you can make voluntary part-payments but the minimum is 10 per cent of the market value of your home at the time of repayment. If this interests you, contact the HomeBuy agent in your area — and remember, you will not be allowed to sublet your home.

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If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona McNulty is a partner in the residential property, farms & estates team at Withy King LLP (withyking.co.uk).

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

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