There are three Help to Buy Schemes set up by the government to aid first time buyers get a foot on the property ladder. One of these schemes is the Help to Buy Equity Loan.

What does it do?
Launched in 2012 to give home buyers a leg up, the Help to Buy Equity Loan allows you to take out a normal mortgage with an institutional lender, which is then topped up with a government equity loan.

This can be up to 20% of your purchase price, leaving you to supply at least a 5% deposit from your own funds.

For example:

For a property worth £200,000 Amount Percentage
Cash deposit £10,000 5%
Equity loan £40,000 20%
Your mortgage £150,000 75%

 

How is it paid back?

You don’t need to start paying the loan back in the first 5 years.

In the 6th year of your loan, you start to repay this in the same way as you make your mortgage payments. If you want to sell your property, then the loan will need to repaid.

The amount you repay is calculated as a percentage of the sale price you achieve for your property, based on the percentage of your loan.

Has it been effective?

The government published statistics showing that in the first 2 years (to 31 March 2015), 47,018 properties were bought (legal completions) with the support of the Help to Buy equity loan scheme.

The majority of sales were to first-time buyers (38,703), representing 82% of total sales.

Is it enough?

The concern is that whilst property prices increase, if salaries don’t increase at the same rate as the cost of living, no matter how much the deposit is, people might not be able save enough for a lump sum.

It is certainly a challenge for young people today. Perhaps the answer is to change our mind-set on whether home ownership is a priority, or home ownership becomes more accessible.

If you are thinking of buying a property then it would be worth researching some of the Buy to Help Schemes available on the government’s website.

Plus, we are always on hand to offer advice and support on buying your own property. For more information, click here.