The Help to Buy: Equity Loan is a government
funded scheme which started in April 2013. It
is intended to help first-time buyers purchase
a home. It offers buyers the option to pay a
5% deposit on a new build property, and the
Government offers 20% of the sale price of
the home.

In simple terms:

• You put down a 5% deposit on
a new-build house
• The government contributes 20%
of the sale price of your home
• You’d need to borrow 75% of the sale price,
by taking out a mortgage.

For example, say the cost
of your new home is £200,000

• Your 5% deposit = £10,000 – this is the
money you’ll need to save for your first
property
• Your 20% Equity Loan = £40,000 – this is the
money the government will lend you for your
first property
• Your 75% mortgage = £150,000 – this is the
money your mortgage lender will provide

Paying back the Equity Loan

To avoid paying back any fees, you’ll have
to pay back the equity loan within the first 5
years. For further information on the fees you’ll
need to pay back after the five years, speak to
your mortgage adviser.
One of the payment options is to pay back in
instalments (also known as staircasing). This
will reduce your fees, meaning that you own a
greater share of the total sale proceeds when
you come to sell.
Another way to pay back the loan is in one
lump sum. If you do that in the first 5 years,
you’ll have no interest to pay, and you’ll own
the property much quicker.

When it comes to selling your house

You’ll need to pay back the equity loan when
you sell the property or after 25 years of
owning the property whichever comes first.
Because this is an Equity Loan, the government
will own 20% of your property. You’ll have to
pay back 20% of the sale fee. This means that
if house prices rise you’ll owe more money.
Likewise, if house prices drop, you’ll owe the
government less than you borrowed.

Help to Buy in London

Instead of a borrowing 20% of a property as
an equity loan, in London, the government has
introduced a scheme that lets you borrow up to
40% of the property value as an equity loan. This
is because house prices are more expensive.
You’ll still need to save a 5% deposit, but you’ll
only need a mortgage for 55% of the property.
Everything else works in the same way as the
standard Help to Buy: Equity Loan above.

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