Finance
What You Should Know About HTB Schemes

The Help to Buy (HTB) scheme ran by the government is available for first-time buyers and existing homeowners to provide loans for newly-built homes.

 

To apply for an HTB loan, the purchasing price must meet at least £600,000 in order to borrow 20% of the purchase price – interest-free for the first five years, regarding that you leave a 5% deposit. Due to the affordability crisis, those who are living in London are able to borrow up to 40% of their house price.

 

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Recent reports have confirmed that the government plans on extending this equity loan scheme from 2021 to 2023, however, this extension will apply only to first-time buyer who are looking to purchase newly-built homes.

From 2021 henceforth, there will be established regional price caps to reduce the maximum value of homes which can be registered under the Equity Loan Scheme.

If you are planning to take out loan with the HTB scheme, you should first be aware of the criteria that must be met.

    • You cannot take out an HTB Equity Loan to purchase a property that you intend on renting out.

    • If you plan on using the HTB scheme, you are only able to take out a repayment mortgage.

    • You are not allowed to buy a property for more than the set price limits.

An Insider’s Guide to the Help to Buy Scheme:

    • You need to lay out 5% minimum of the sale price of your new-build home as a deposit.

    • While the government will lend you the primary 20-40% depending on where your home is situated, the remainder of the loan will need to be taken out from a mortgage lender on a repayment basis.

    • The equity loan needs to be paid off in a 25 year time frame, or even earlier if you sell your home beforehand.

    • It is required to repay the same percentage of the proceeds of the sale as the initial equity loan. For example, if you received an equity loan for 20% of the purchase price of your home then you must repay 20% of the proceeds of future sales.

For example:

Cost Name     Total % Value £
Your Deposit 5% £10,000
Equity Loan 20% £40,000
Mortgage 75% £150,000
TOTAL £200,000

It is not necessary to pay any interest fees when using the government equity loan for the first five years however, after the sixth year, you would be charged 1.75% After this point, the fees fluctuate due to inflation around the Retail Prices Index (RPI by the Office for National Statistics) plus 1% every year onwar

The Help to Buy (HTB) scheme ran by the government is available for first-time buyers and existing homeowners to provide loans for newly-built homes.

To apply for an HTB loan, the purchasing price must meet at least £600,000 in order to borrow 20% of the purchase price – interest-free for the first five years, regarding that you leave a 5% deposit. Due to the affordability crisis, those who are living in London are able to borrow up to 40% of their house price.

Recent reports have confirmed that the government plans on extending this equity loan scheme from 2021 to 2023, however, this extension will apply only to first-time buyer who are looking to purchase newly-built homes.

From 2021 henceforth, there will be established regional price caps to reduce the maximum value of homes which can be registered under the Equity Loan Scheme.

If you are planning to take out loan with the HTB scheme, you should first be aware of the criteria that must be met.

    • You cannot take out an HTB Equity Loan to purchase a property that you intend on renting out.

    • If you plan on using the HTB scheme, you are only able to take out a repayment mortgage.

    • You are not allowed to buy a property for more than the set price limits.

An Insider’s Guide to the Help to Buy Scheme:

    • You need to lay out 5% minimum of the sale price of your new-build home as a deposit.

    • While the government will lend you the primary 20-40% depending on where your home is situated, the remainder of the loan will need to be taken out from a mortgage lender on a repayment basis.

    • The equity loan needs to be paid off in a 25 year time frame, or even earlier if you sell your home beforehand.

    • It is required to repay the same percentage of the proceeds of the sale as the initial equity loan. For example, if you received an equity loan for 20% of the purchase price of your home then you must repay 20% of the proceeds of future sales.

For example:

Cost Name     Total % Value £
Your Deposit 5% £10,000
Equity Loan 20% £40,000
Mortgage 75% £150,000
TOTAL £200,000

It is not necessary to pay any interest fees when using the government equity loan for the first five years however, after the sixth year, you would be charged 1.75% After this point, the fees fluctuate due to inflation around the Retail Prices Index (RPI by the Office for National Statistics) plus 1% every year onwards.

The Help to Buy scheme is in place to support aspiring homeowners who are struggling with the UK housing market’s lack of affordability as they attempt to get a foot on the housing ladder. As the wealth gaps spread across the regions, the market is having to constantly adapt in order to make purchasing new homes possible for the average worker in the UK.

Compariqo Finance offers bespoke re-financing solutions to the property sector. Contact one of our advisors if you are considering further finance on your home.

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