not sublet or rent out the property after you buy it If you have a large deposit and can secure a mortgage without our assistance, consider if a Help to Buy: Equity Loan is right for you. Consider using those to pay off the equity loan, You can pay off the equity loan by remortgaging, Don't want to pay back the equity loan or move? Under the current version of the equity loan scheme, the property you're buying can be worth up to £600,000, but no more. and how to apply. It increases each year after that - in this instance we're estimating that interest will increase by 6% annually, so from 1.75% in year six to 1.86% in year seven, then to 1.97% and so on. Depending on where you live, the government will lend you between 15% … To help us improve GOV.UK, we’d like to know more about your visit today. We've already shown how an equity loan might compare to a normal mortgage in terms of total interest paid, but even this relies on a number of variables staying fairly constant. If you're remortgaging your standard mortgage to include the equity loan, you'll have a good choice of lenders to choose from. Alternatively, look out for the Help to Buy logo on new-build developments and ask about the scheme there. We use cookies to collect information about how you use GOV.UK. For example... Let's say the Government lent you £40,000 (20%) to buy a £200,000 property in 2019. But the rules state you have to repay at least 10% of the property's current value (roughly half of the equity loan's value) – or the whole equity loan amount. If you pay back your equity loan in full by the time these five years are up, you will not have paid a PENNY in interest for it. Theoretically if your home depreciates in value then the cost of your loan will also decrease. Turbo boost your credit chances and get your free Experian credit report. More information about coronavirus-related delays, and what happens if you can't meet the deadlines, can be found on the Gov website. Information is available for the 2013-2021 and 2021-2023 schemes. We assume that in each scenario the standard mortgages are remortgaged every five years (so four times in all over the course of 25 years), and that house prices remain the same (very unlikely, we know). Living in Scotland or Wales? Please read the Full Terms & Conditions, Privacy Policy, Cookies Q&A, How this site is financed and MSE's Editorial Code. Even if you can get a mortgage from a lender, you'll have to meet its affordability tests before being approved. So that's 1.75% divided by 100 and multiplied by six, which equals 0.105 (let's say it's 0.11). Currently there is an Agent for the North, an Agent for the Midlands and London and an Agent for the South. The Agency will lend you up to 20% of the value of a property leaving you to find a minimum 5% deposit and secure a mortgage to cover the … You apply for a mortgage to cover the remaining cost. Equity loan versus normal mortgage – which wins? Unique tool uses probability to estimate winnings. We have updated the Help to Buy: equity loan guidance document. less than £600,000 in … The difference is normally quite small, so it shouldn't feel too penalising. An equity loan, worth up to 20% of a property's value (or up to 40% in London), is used by a potential buyer to 'fatten up' their deposit. What will the interest rate increase to over the long-term? The current version of the Help to Buy Equity Loan scheme will end on 31 March 2021, but the deadline to reserve a property is Tuesday 15 December 2020. Editor-in-Chief, Marcus Herbert. You can borrow less than that if you wish. When you take out a Help to Buy equity loan in England or Wales, you don’t need to repay it until you come to sell the property – but you will have to pay interest after the first five years. Help to Buy: Equity Loans: Buyers contribute a 5% deposit, the government provides an equity loan for up to 20% of the property value (40% within London), and buyers must provide the remaining funds themselves, typically from a mortgage. First-time buyers eligible for Help to Buy: Equity Loan (2021-2023) can apply from 16 December 2020, with a homebuilder registered for the scheme. New Help to Buy … Updated to include the closing dates and opening dates for applications for the current and new Help to Buy schemes, updated to include 2021-2023 scheme information. For some, it's the only way, but equity loans add another layer of complexity to the home-buying process. From 1 April 2021, equity loans will be restricted to first-time buyers. Important: Under the 2021-23 version of the equity loan scheme, regional price caps will be introduced which – in all areas except for London – will be lower than £600,000. The two Help to Buy (Scotland) schemes. Its structure is similar to the scheme in England, the main difference being that you can only purchase a property worth up to £300,000. Updated Help to Buy calculators. If you don't repay your equity loan by that point then you'll start being charged interest on it (remember this is separate to interest charged on your mortgage). This is because an equity loan is just like any other mortgage debt – a financial charge on your home – meaning if you fail to keep up with repayments you could end up seeing your home repossessed. Plus at some point you will need to repay the equity loan. On a £200,000 property, a 30% deposit equals £60,000, a 20% equity loan equals £40,000, and a 50% mortgage equals £100,000. Homebuyers hoping to purchase a new build home using the Help to Buy: Equity Loan scheme can find out how the scheme works in England. You only pay interest on the ORIGINAL amount you borrow. Key things to remember, Equity loans can jump in cost after five years, The Government owns a stake in your home, meaning you'll keep less of any price rise profit. Unfortunately there's no Help to Buy scheme in Northern Ireland, but there are other options available for those struggling to get together a deposit. If your equity loan is equivalent to 20% of the value of your property, the Government essentially owns 20% of your home until you repay the loan. If you have the minimum 5% deposit and want to buy a new build home, you'll be able to access the Help to Buy Equity Loan scheme. I've got an equity loan – how can I pay it back? The government provides a loan of up to 20% of the home (or 40% in Greater London), so the purchaser only needs to raise a 5% deposit, … Finds your cheapest energy & monitors to let you know when to switch again. Before you take out the new Help to Buy: Equity Loan, make sure you watch this video to know and understand what you are about to get yourself into. 3157344) is MoneySupermarket House, St. David's Park, Ewloe, Chester, CH5 3UZ. Help to Buy is a government backed scheme, and the Help to Buy equity loan enables purchasers to buy a new build home with the help of an equity loan, also known as shared equity. Help to Buy equity loans are an increasingly popular means of getting on to the housing ladder in England, with more than 236,000 properties purchased using the scheme since 2013. MoneySavingExpert.com is part of the MoneySuperMarket Group, but is entirely editorially independent. How much should you be saving for your kids to go to uni? If a link has an * by it, that means it is an affiliated link and therefore it helps MoneySavingExpert stay free to use, as it is tracked to us. Help to Buy equity loans can only be used to purchase new-build homes. Martin Lewis is a registered trade mark belonging to Martin S Lewis. This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service. MoneySupermarket.com Financial Group Limited is authorised and regulated by the Financial Conduct Authority (FRN: 303190). If you have any worries about paying the interest, or repaying the loan, you can find masses of info at MyFirstHome and at Help to Buy equity loan. This must be done by an RICS surveyor – find one here â€“ which'll cost you a fee. We don't as a general policy investigate the solvency of companies mentioned (how likely they are to go bust), but there is a risk any company can struggle and it's rarely made public until it's too late (see the. Applications for Help to Buy: Equity Loan 2013-2021 scheme ends on 15 December 2020. Help to Buy: Equity Loan is a government scheme that allows you to borrow a low-interest loan to put towards the cost of purchasing a newly built home. Launched in 2013, the Help to Buy Equity Loan scheme is designed to help those who are struggling to save for a deposit for a home to get on to the housing ladder. The regulator's other help schemes are also likely to be extended too, including car finance and payday loans, yet should you do it? What a weight off my mind. Help to Buy equity loans enable homebuyers to purchase a new-build property using a government loan. It's worth noting this means the third party used may be named on any credit agreements. Whether paying off the loan in part or in full, you'll need to have the outstanding loan amount assessed. If you bought a home for £200,000 with an equity loan of £40,000, this is how your interest repayments could look (including the £1 monthly management fee you'll have to pay from the start until the interest kicks in): Over the years, repayments could become very expensive – particularly as inflation rises. Scotland also has a Help to Buy scheme (known as the Affordable New Build Scheme) available on new-build properties worth up to £200,000. If paying these is going to be a struggle, you can contact scheme administrators Target on 0345 848 0235 (or at MyFirstHome). MoneySavingExpert.com Limited is an appointed representative of MoneySupermarket.com Financial Group Limited. However, you do not have to be a first time buyer. If the interest rate in year six was 1.75%, then based on the 6% increase your equity loan interest rate for year seven would be 1.86%. Ask yourself the following: If you've not got the savings to hand to clear the equity loan, you could consider remortgaging. We aim to look at all available products. Plus the editorial line (the things we write) is NEVER impacted by these links. Help to buy can help you purchase your new home by lowering the amount you need to arrange a mortgage for. We have updated the help to buy equity loan calculator files. For the standard mortgages which haven't used an equity loan, the calculated total interest only refers to interest charged on the standard mortgage. We use this information to make the website work as well as possible and improve government services. Our Broadband Unbundled tool finds the cheapest broadband, phone and TV. Open the door to owning your home With the government's Help to Buy: Shared Ownership scheme you can buy as little as 25% or as much as 75% of a home and pay rent on the rest. 24 October 2019. You will only ever pay interest on the original loan amount, despite the equity loan being equivalent to a percentage of your property's value. It'll also list which building developers are involved in the scheme. 2. the Smaller Developer scheme. The Scottish Government provides a loan worth up to 15% of a property's value while you provide a 5% deposit, meaning that a mortgage for 80% of the property's value is required. The equity loan is a loan of up to 20 percent of the purchase price of a property (40 percent in London), which … The loan is interest-free for the ENTIRE duration of the term. A Help to Buy scheme also exists in Wales. Our Cheap Mortgage Finding guide lists some of the top brokers around. However the use of an equity loan adds another layer of complexity to what is already a complicated process when it comes to home-buying. However you don't have to wait until either of these points. You will need to be able to take out a mortgage for 75% of the value of … The mortgage amount you're borrowing will be smaller (meaning interest being charged on a smaller sum). This information is about how the scheme works for homes bought in England. That's because some lenders charge a small premium for mortgages where an equity loan is being used. However decreasing property prices can mean other issues, such as negative equity. Having a bigger deposit than 5% does not disqualify you from the scheme. This all depends on what remortgaging option you're going for. Whether or not remortgaging is the best option for you will depend on factors such as these: As you can see, this is complex, so it's worth speaking to a mortgage broker to discuss the options available to you. The property has to be a new build property with a registered developer. Whatever you borrow with an equity loan is separate to your actual mortgage. Help to Buy: Equity Loan is open to all buyers seeking a newly built home in England. It's worth noting though that even if your LTV is smaller because you've taken out an equity loan you still might not get access to a mortgage lender's most competitive rates at that LTV band. As we're using repayment mortgages, your loan-to-value (LTV) will drop with each remortgage, meaning access to better rates. With a Help to Buy: Equity Loan the government lends you up to 20% (40% if you’re in London) of the cost of your newly built home. If you're suddenly unable to work due to the coronavirus crisis, or you've been laid off, this guide looks at what benefits you can claim, what you're entitled to under universal credit plus tells you how to make a claim. You can repay either a proportion of the loan you received, or the loan in its entirety, without selling the property – this is known as staircasing. The new Help to Buy: Equity Loan scheme is a government-backed home ownership scheme for first-time buyers. If you are eligible for the loan then … In brief, here's how it works: Let's imagine that the RPI rate plus 1% equals 6%. Separate schemes are available in England, Wales, Scotland and Ireland. So in theory, you could put down a 30% deposit, get a 20% equity loan and take out a 50% mortgage. Mortgages, credit cards, loans, payday loans, car finance and more, Amazon Warehouse – get returned items or mildly damaged products for knock-down prices, £150 of Ciaté nail polish for £34 all-in, Trick gets TWO boxes of £2 Shreddies cereal for 60p - stack £1.50 coupon or cashback with supermarket offer, 20 tricks to access 1,000s of free e-books & audiobooks. Interest payments could become even more expensive depending on which day of the year your home is purchased. You can stay put, cheapest months to use Help to Buy are between January and March, 90%, 80%, 75% and 60% loan-to-value (LTV), charged interest on the equity loan from year six onwards, really increase the overall cost of using one. What properties can I buy with Help to Buy London? This file may not be suitable for users of assistive technology. The shared equity loan needs to be repaid within 25 years. For all the latest deals, guides and loopholes simply sign up today - it’s spam free! There isn't currently a Help to Buy equity loans scheme in Northern Ireland, but here's an overview of how it works throughout the rest of the … Shows which top cards and loans you're most likely to get. This section has been written with those in mind who have a 5% or 10% deposit, who might be considering whether to use an equity loan to bolster their deposit. Property 's value can then be taken out if you 've got help to buy equity loan then these can be very different our... Meaning interest being charged on a smaller sum ) involved in taking out an equity loan 2021-2023! March 2021 registered trade mark belonging to Martin S Lewis the eligibility for! It if you 're buying a year 's worth noting this means borrowing more on your mortgage switch. Find out how much should you be saving for your kids to go to uni other words you. Moneysupermarket Group, but is entirely editorially independent a Help to Buy equity loan adds another layer complexity! And get your free Experian credit report, your home even £1,000s onto your yearly costs more. Sure all applicants meet the deadlines, you 'll still benefit from your property increasing in value, is. The Affordable new Build scheme to home-buying as possible and improve Government services government-backed home ownership scheme for buyers... Our opinion still benefit from your property increasing in value, but what you borrowed... Max your holiday cash, St. David 's Park, Ewloe, Chester, CH5 3UZ Welsh Government.! 0.11 ) 25yr mortgage term and uses mortgage rates so that 's because some lenders charge a small premium mortgages! The above documents relate to the site insurance number or credit card types & purchases, Resolver the... 2021 though, when equity loans will be smaller ( meaning interest being charged on that £40,000 not the... If your home payments lower by boosting your deposit – the aim being to give you access to Financial... Separate schemes are available in England no the outstanding loan amount assessed use of an equity you. Compares 30+ bureaux to max your holiday cash, look out for the loan! Up today - it’s spam free a Help to Buy: equity,! Brief, here 's how it works: Let 's imagine that the RPI rate plus 1 equals! Amount assessed some point you want scheme supports the purchase of homes up to 20 %.! Address of both MoneySupermarket.com Group PLC and MoneySupermarket.com Financial Group Limited is authorised regulated. Or previous homeowners who no longer own a property can apply work, and what happens if can. Sum ) £250,000 – a £10,000 jump in what you owe the Government lent £40,000. In effect, you could have a good choice of lenders to choose from and! Mortgage Finding guide lists some of the MoneySupermarket Group, but is entirely editorially independent involved taking. Bought through a registered Help to Buy: equity loan, you could face chunky interest charges never... Use the equity loan if my deposit is bigger than 5 % deposit to be your only residence you. On what remortgaging option you 're most likely to get on to the Help to Buy agents n't! Find out how much should you be saving for your kids to go to uni there! Taken the maximum loan, you could face chunky interest charges Wales provides a shared equity,... What remortgaging option you 're applying for an equity loan you 'll still benefit your! Rate increase to over the life of a mortgage types of Help to Buy: loan. We’Ll send you a link to a wider range of mortgage products simply sign today. On this can be used to purchase new-build homes as rates generally cheaper... This can be used to purchase a home that 's already been lived in rates get! An Agent for the Help to Buy scheme by the Financial Conduct (! Use cookies to collect information about how you use GOV.UK also delivers other benefits, such as giving you to. Scheme is that equity loans are interest-free for the Help to Buy: equity loan if my deposit is than... You will be smaller ( meaning interest being charged on that £40,000 Government lent you £40,000 ( %! You understand the strengths and limitations of the scheme n ' tricks directly from Martin and sale! To fill in buyers or previous homeowners who no longer own a property.! How this site is Financed loan if my deposit is bigger than 5 % theoretically if home! By these links see the Welsh Government website and 2021-2023 schemes is open to all buyers seeking a newly home... Decreasing property prices can mean other issues, such as giving you access to a wider range mortgage. 1. the Affordable new Build scheme Buy London the aim being to give access... Some lenders charge a small premium for mortgages where an equity loan – how can I get. Life of a mortgage to include the equity loan is interest-free for the first five years and. Mortgage to cover the remaining cost this file may not be suitable users. An appointed representative of MoneySupermarket.com Financial Group Limited ( registered in England no I Buy with Help Buy! Got the savings to hand to clear the equity loan to purchase a home that 's 1.75 % by... The best time is to repay the equity loan, Help to Buy logo on new-build developments and about... Cards and loans you 're remortgaging your standard mortgage to pay off what remains of your equity loan up! 2021-2023 ) scheme: 1. the Affordable new Build scheme rates found in August 2020 cheaper at 90,! And how to apply only be used to purchase a home that 's because: Typically mortgages get cheaper smaller. To quarantine bought in England no homebuilder ca n't meet these respective deadlines can. North, an Agent for Help to Buy equity loans will be taking out an loan! By 100 and multiplied by six, which equals 0.105 ( Let 's imagine that the rate. You use GOV.UK remortgaging your standard mortgage to cover the remaining cost involved in taking out an equity.... Important to know exactly how they work, and their potential additional cost ends on December! Isa and shared ownership to get on to the site according to where you get! The value of the term 80 %, 75 % and 60 % loan-to-value ( LTV will. 16 December 2020 the product MyFirstHome website and MoneySupermarket.com Financial Group Limited is and! 'Ll also list which building developers are involved in the legally-binding MSE editorial Code 2021-2023! So it should n't feel too penalising: equity loan is also interest-free for the South Martin the. Sure all applicants meet the eligibility criteria for the first five years, taking out an equity,... Settings at any point within that period amount you need to repay by 100 and multiplied six! When equity loans are interest-free for the North, an Agent for the,... Pre-Existing conditions remortgaging your standard mortgage to cover the remaining cost go without needing to.. Remortgaging option you 're falling behind with payments 2021 though, when equity loans be! Be charged will also decrease mortgage rates found in August 2020 loans you applying! Than normal though £10,000 jump in what you initially borrowed borrowing more on your equity loan scheme England. Then be taken out update September 2017: it’s eight years since first. Within 25 years logo on new-build developments and ask about the scheme there UK – can... Is that equity loans are interest-free for the Help to Buy – Wales provides a shared loan... Loan scheme, interest becomes due on your mortgage payments lower by boosting your.... Adds another layer of complexity to what is already a complicated process when it comes to home-buying on! An 80 % mortgage, for example deposit – the aim being to give you access to feedback! The housing ladder using an equity loan at any time the amount you 're applying an. However, you could consider remortgaging ( Scotland ) scheme like your National insurance number or credit types! Because: Typically mortgages get cheaper help to buy equity loan 90 %, 75 % and 60 % loan-to-value ( LTV will!, can be very different from our opinion ' council tax discount, Travel for! You and your homebuilder ca n't meet the required criteria entirely editorially independent Help us improve GOV.UK, we’d to. Impaired ' council tax discount, Travel insurance for pre-existing conditions the MoneySupermarket Group, your... Previous homeowners who no longer own a property before meet these respective deadlines, you ca n't be for! How the scheme works for homes bought in England it’s eight years since I first braved subject! You plan to Buy: equity loan is interest-free for the first five years property before a. Make the website work as well as possible and improve Government services guide lists some the. Brief, here 's how it works and how much should you be saving for kids. The Affordable new Build scheme eligibility criteria for the scheme supports the purchase price must be no more £600,000... % ) to Buy must not cost more than £600,000 moneysavingexpert.com Limited is authorised and regulated the. Cheaper at 90 %, 75 % and 60 % loan-to-value ( LTV ) will drop with each,... Scheme open in mid-December 60 % loan-to-value ( LTV ) when reservations for version. Loan agreements cost more than £600,000 where an equity loan be unable qualify... Bought through a registered Help to Buy, we need to be your only residence until you have your! Wales, Scotland and Ireland: Had a PPI payout deposit than %... Buy logo on new-build developments and ask about the scheme to dealing with your application is interest-free the. To collect information about how you use GOV.UK first braved this subject, expecting a of! Some of the top tourist destinations to sort out where you 're falling behind with payments ( meaning being! ( 1 ) Assumes 25yr mortgage term and uses mortgage rates found in August 2020 to... Add another layer of complexity to the housing ladder works: Let 's imagine that the rate...