Help to Buy: Equity Loan

Your dream Plumlife home could be yours with just a 5% deposit thanks to the Government's Help to Buy: Equity Loan scheme.

From April 2021, the Help to Buy scheme will only apply to first-time buyers purchasing a new-build home and will also include new maximum regional house price caps.

Reservations using Help to Buy will now come under the new version of the scheme. You can read more about the scheme on the government's website by clicking here.

How does it work?

The Government will give you an equity loan of 20% of the value of your property to help you buy. There is no interest to pay on this loan for the first five years.

The equity loan will be a second charge on your property and will represent a percentage of the value of your property. So when you pay back the loan, you will pay it back as a percentage of the current market value of your home.

The Help to Buy: Equity Loan is subject to eligibility, terms and conditions.

For example:

Your home cost £200,000 when you bought it and you had a 20% equity loan of £40,000.

If your home is worth £300,000 when you sell it, you will pay back 20% of £300,000 ie £60,000

Your loan must be paid back either when you sell your property or at the end of 25 years, whichever is sooner.

You will need a conventional mortgage from a qualified lending institution and a minimum deposit of 5% (subject to lender requirements). Don't forget that you will also need enough money to pay for your legal fees, costs of moving, and stamp duty (where applicable).

To qualify for a Help to Buy: Equity Loan, you must:

  • Sign a legal declaration to confirm that you are first-time buyers
  • Not own a home or residential land now or in the past in the UK or abroad
  • Take out a repayment mortgage that is valid for the duration of the equity loan
  • Not have had any form of Sharia mortgage or Home Purchase Plan in the past
  • Be able to afford the monthly mortgage repayments

If you are applying to use the Help to Buy: Equity Loan scheme and you are married or in a civil partnership, you will have to apply jointly with your spouse or civil partner. All parties buying the home must meet eligibility criteria.

The Help to Buy: Equity Loan is subject to eligibility, terms and conditions.

• North West - £224,400

• North East - £186,100

• Yorkshire and the Humber - £228,100

• East Midlands - £261,900

• West Midlands - £255,600

• East of England - £407,400

• London - £600,000

• South East - £437,600

• South West - £349,000

When deciding if an equity loan is right for you, it’s important to consider the full cost of your borrowing:

For the first 5 years:

  • The equity loan is interest free
  • You pay a £1 monthly management fee by Direct Debit

 From year 6:

  • Pay the £1 monthly management fee
  • Pay monthly interest fee of 1.75% of the equity loan
  • Interest rate will rise each year in April by the Consumer Price Index (CPI), plus 2%
  • You’ll continue to pay interest until you repay your loan in full
  • When you take out your equity loan, you agree to repay it in full, plus interest and management fees

You must repay your equity loan in full:

  • At the end of the equity loan term
  • When you pay off your repayment mortgage
  • When you sell your home
  • If you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full
  • The amount you pay back is worked out as a percentage of the market value at the time you choose to repay

If you still have the loan when you do come to sell, you will repay it at this stage and the amount you pay back will depend on how much your home is worth. So, if you initially purchased with a 5% deposit and 75% mortgage, you would need to repay 20% of the home’s value at the time you sell.

If the market value of your home rises, so does the amount you owe on your equity loan. And if the value of your home falls, the amount you owe on your equity loan falls too.

Help to Buy: Equity Loan properties are available from participating registered developers. You can find details of registered developers offering Help to Buy: Equity Loans throughout the North West by visiting the Help to Buy Agency: https://www.helptobuyagent1.org.uk/

The Help to Buy: Equity Loan is subject to eligibility, terms and conditions.