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Help to Buy
Buyers’ Guide
Homes England
http://www.homesengland.gov.uk/helptobuy
February 2018
Amended June 2020
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Contents
Key information ................................................................................................ 3
What is Help to Buy? ....................................................................................... 4
Help to Buy overview ....................................................................................... 5
How does it work? ............................................................................................ 6
Who can take part in the scheme?................................................................... 8
What does the Help to Buy Agent do? ............................................................. 9
How to buy a Help to Buy home?................................................................... 10
How long does the process take? .................................................................. 12
Leasehold reform and Help to Buy Equity Loan. What does this mean for
Help to Buy homebuyers? .............................................................................. 13
Your mortgage ............................................................................................... 14
What happens when I sell my Help to Buy home? ......................................... 15
What happens if property values fall? ............................................................ 17
Are there any restrictions on the mortgage provider? .................................... 19
Fees and costs............................................................................................... 20
Annual Percentage Rates (APR) for Help to Buy owners .............................. 23
Additional Help to Buy equity loan administration charges ............................ 24
Questions and answers ................................................................................. 25
Find your Local Help to Buy Agent................................................................. 29
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Key information
Buyers using this scheme must provide security in the form of a second legal
charge over the home purchased with the Help to Buy equity loan.
Amount of loan
The maximum you can borrow from
Help to Buy in England is £120,000
and up to £240,000 for London.
There is no minimum amount.
Buyer deposit required
Buyers must provide a deposit of a
minimum of 5% of the full purchase
price of the home bought under this
scheme.
Frequency, number and
amount of repayments
After five years you will be required to
pay an interest fee of 1.75% of the
amount of your Help to Buy shared
equity loan at the time you purchased
your property, rising each year after
that by the increase (if any) in the
Retail Prices Index (RPI) plus 1%.
More details are on page 18.
The loan itself is repayable after 25
years or on the sale of the property if
earlier.
Other payments and charges
You must pay a monthly management
fee of £1 per month from the start of
the loan until it is repaid.
Total amount repayable
The total amount repayable by you
will be the proportion of the market
value of your home that was funded
by this loan, plus interest and
charges. The amount you will have to
repay under the loan agreement will
depend on the market value of your
home when you repay the Help to
Buy equity loan and the rate of
inflation in the meantime. An
example is shown on page 21
including the equivalent APR.
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What is Help to Buy?
Help to Buy is equity loan assistance to home buyers from Homes England
1
.
Help to Buy makes new build homes available to all home buyers (not just first
time buyers) who wish to buy a new home, but may be constrained in doing
so – for example as a result of deposit requirements – but who could
otherwise be expected to sustain a mortgage.
Up to a maximum of 20% in England and up to 40% in London
2
, of the
purchase price is available to the buyer through an equity loan funded by the
Government through Homes England.
Help to Buy is available in England from house builders registered to offer the
scheme. Help to Buy has been available since 2013. In November 2015,
Government announced an extension of the initiative up to 2021 (it may close
earlier if all of the funding is taken up before 2021).
This guide provides an overview of the product. If you’d like to know more, or
if you want to apply, please contact your Help to Buy agent
www.helptobuy.gov.uk .
Your home may be repossessed if you do not keep up repayments on a
mortgage or any other debt secured on it.
Check that these mortgages will meet your needs if you want to move or
sell your home or you want your family to inherit it. If you are in any
doubt, seek independent advice.
APR 5.2% typical (see page 23 for more information).
1
Homes England was launched by the Secretary of State on 11 January 2018. Homes England is the
trading name of Homes and Communities Agency (the legal entity) and all Help to Buy mortgages have
Homes and Communities Agency as the lender.
2
As part of the Government’s Autumn Statement (November 2015) it was announced that London Help
to Buy will increase the equity loan available to a maximum of 40% of the purchase price from early
2016. This guide provides information and examples for both the London Help to Buy equity loan of
40% and the 20% equity loan that is available across the rest of England.
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Help to Buy overview
With Help to Buy, the buyer (‘you’) buys a new home on a new build
development with assistance from Homes England in the form of an equity
loan.
For Help to Buy in England, not London, you must take out a first mortgage
(with a qualifying lending institution e.g. a bank or building society) for at least
25% of the value of the property you wish to purchase. This mortgage,
together with any cash contribution from you, must be a minimum of 80% of
the full purchase price. The maximum full purchase price is £600,000.
For London Help to Buy 40% equity loan assistance, your first mortgage must
be at least 25% of the value of the property you wish to purchase. The
mortgage, together with the cash contribution from you, must be a minimum of
60% of the purchase price. The maximum full purchase price is £600,000.
Your cash deposit contribution must always be a minimum of 5% of the full
purchase price.
Homes England will provide an equity loan to fund the balance needed to
make up the full purchase price of your home, up to a maximum of 20% (40%
maximum for London Help to Buy) of the full purchase price.
The equity loan must be repaid after 25 years, or earlier if you sell your home.
You must repay the same percentage of the proceeds of the sale to Homes
England as the initial equity loan (i.e. if you received an equity loan for 20% of
the purchase price of your home, you must repay 20% of the proceeds of the
future sale).
An initial monthly management fee of £1 is payable by direct debit from the
start of Homes England loan until it is repaid. After the first five years you will
pay an additional fee as interest of 1.75%, rising annually by the increase (if
any) in the Retail Price Index (RPI) plus 1%.
Local Help to Buy Agents will assess and approve your purchase for Help to
Buy, and you need their approval before you proceed with the buying process.
Further details on all these points and the buying process are set out within
this guide.
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How does it work?
Help to Buy enables buyers to purchase a new property, funded by a
mortgage and with help from Homes England.
This enables you to take out a mortgage on which you make repayments in
the normal way. Your mortgage lender will require that you contribute a
deposit (minimum 5% of the full purchase price). Your mortgage and deposit
must cover a combined minimum of 80% of the total purchase price (or 60%
of total purchase price in London). The rest of the purchase price will be paid
for with an equity loan from Homes England.
As a result of providing this assistance, Homes England has an
entitlement to a share of the future sale proceeds equal to the
percentage contribution required to assist your purchase. Examples of
this are shown below.
For the first five years of Help to Buy home ownership you will pay an initial
monthly management fee of £1. This continues until the loan is repaid.
After five years, the equity loan will be subject to an additional interest fee
(collected from you on behalf of Homes England by Homes England’s
Mortgage Administrator) of 1.75% per annum on the outstanding amount of
the equity loan. From the fifth anniversary of the loan this fee will increase
each year by the increase (if any) in RPI plus 1%. This is illustrated on page
18.
The management fee and interest fees are not capital repayments to your
Homes England equity loan – they do not reduce the amount owing.
When you sell your Help to Buy home (unless you have chosen to repay
your equity loan earlier), you must repay the Help to Buy assistance
from a share of the sale proceeds. So, if Homes England assisted your
purchase with a 20% contribution, your repayment will be 20% of the
total market value when it is sold. Turn to page 17 to see what happens
if values have fallen.
Following the purchase you can choose at any time to make voluntary part
repayments (‘staircasing’ or a full repayment) of the Help to Buy assistance at
the prevailing market value. The minimum voluntary repayment is 10% of the
market value at the time of repayment.
Homes England’s entitlement to a share of the future sale proceeds is
secured through a second charge on your home. This is done in the same
way that your main mortgage lender will secure its lending through a first
charge on your home. Although, if you buy through Help to Buy, you will have
a mortgage for less than the full purchase price of the property, you will be the
legal owner with 100% title to your home. The tables below show how it
works.
In this example below, the Help to Buy buyer has purchased a £200,000
home with a deposit of £10,000 and a mortgage of £150,000. Homes England
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has contributed an equity loan totalling £40,000 or 20% of the total purchase
price.
In this example, when the home is sold, Homes England will be entitled to
20% of the total sale price.
Example of Help to Buy home ownership in England, not
London
£
Open market price of new home
£200,000
Help to Buy buyer mortgage @ 75%
£150,000
Help to Buy buyer pays minimum 5% deposit
£10,000
Help to Buy buyer total contribution
£160,000
Homes England Help to Buy assistance 20% equity loan
£40,000
Help to Buy always requires that the buyer has a main mortgage of at least
25% of the full purchase price.
In this example below, the London Help to Buy buyer has purchased a
£400,000 home with a deposit of £20,000 and a mortgage of £220,000.
Homes England has contributed an equity loan totalling £160,000 or 40% of
the total purchase price. In this example, when the home is sold, Homes
England will be entitled to 40% of the total sale price.
Example of London Help to Buy home ownership
£
Open market price of new home
£400,000
Help to Buy buyer mortgage @ 55%
£220,000
Help to Buy buyer pays minimum 5% deposit
£20,000
Help to Buy buyer total contribution
£240,000
Homes England London Help to Buy assistance 40%
equity loan
£160,000
Help to Buy always requires that the buyer has a main mortgage of at least
25% of the full purchase price.
Because Help to Buy assistance is through an equity loan, the amount
required to increase your equity share will be dependent on the total value of
the property at the time you want to redeem part of your equity loan
(sometimes known as ‘staircasing’) or repay in full.
The amount you need to do this will increase if your home increases in value
and decrease if its value falls (see examples later in this guide).
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Who can take part in the scheme?
It is open to all buyers seeking a new build home.
Help to Buy buyers outside London must be able to fund up to 80% of their
selected property through a conventional mortgage and deposit. London Help
to Buy buyers must be able to fund 60% of the property through a
conventional mortgage and deposit.
Buyers must always provide a 5% cash deposit contribution (5% of the full
purchase price).
Buyers must take out a first charge mortgage with a qualifying lender.
The maximum purchase price is £600,000.
The Local Help to Buy Agent (see below) will carry out an assessment of an
application by a potential Help to Buy buyer to ensure that they are in a
position to afford a conventional mortgage for their proposed purchase. This
protects tax payers’ investment in the Help to Buy home. Buyers cannot use
the scheme if they require a main mortgage more than 4.5 times their
household income.
You must have access to a minimum 5% deposit of the full purchase price.
The property purchased must be your only residence. Help to Buy is
not available to assist buy-to-let investors or those who will own any
property other than their Help to Buy property after completing their
purchase.
You cannot rent out your existing home and buy a second home
through Help to Buy.
Applicants who make fraudulent claims for Help to Buy assistance may
be liable to criminal prosecution.
Fraudulent claims will always require immediate repayment of the Help
to Buy equity loan assistance.
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What does the Help to Buy Agent do?
The Local Help to Buy Agents work on behalf of Homes England to signpost
potential buyers towards Help to Buy schemes in their area and will carry out
a sustainability check on applicants. Details of the policy the agents follow is
published here and is updated from time to time.
They will also guide you through the process of buying your Help to Buy home
and issue the approvals to your solicitor and the house builder to purchase
the home through the Help to Buy scheme.
The role of the Local Help to Buy Agent is to:
• hold information about Help to Buy schemes for prospective buyers,
• assess long term sustainability and eligibility, and
• give approval to a Help to Buy buyer’s solicitor/conveyancer to proceed
with a purchase.
Following the Help to Buy sale, your details will be transferred to Homes
England’s Mortgage Administrator.
The role of Homes England’s Mortgage Administrator is to provide a single
point of contact to:
• administer payment of fees and interest by buyers on their Help to Buy
equity loans,
• recover the equity loans repayments as owners sell and move on or
staircase, and
• provide advice and approval for exceptional cases relating to
subletting, remortgaging and requests for additional borrowing.
You can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
Where are Help to Buy homes available?
Help to Buy homes are available from house builders registered to offer Help
to Buy homes in England. Registered builders will make it clear in their
advertising if Help to Buy homes are available on their development sites.
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How to buy a Help to Buy home?
The four-stage Help to Buy buying process
Stage 1: Application
• Contact house builders, visit schemes of registered house builders and
identify your potential Help to Buy property.
• Its recommended that you see an Independent Financial Advisor (IFA)
to gain confirmation of your financial status. The Local Help to Buy
Agent and house builders will be able to suggest some IFAs for you to
try.
• You must ensure you have funds to pay:
o a reservation fee if required (maximum £500)
o a deposit on exchange of contracts of at least 5% of the full
purchase price (some main mortgage lenders may require
higher deposits)
o other fees on completion (e.g. stamp duty, legal fees, main
mortgage fees).
• You complete a Help to Buy “Property Information Form” (available
from the house builder). You must complete this with details of your
proposed purchase, your proposed main mortgage, deposit and
including your household income. The Property Information Form also
confirms your agreement to the funds due under the Help to Buy
mortgage being paid directly to the house builder.
• You must also reserve the home. You will usually be expected to pay
a reservation fee to the house builder.
• The signed Property Information Form and a copy of the builder’s
reservation form must be sent to the Local Help to Buy Agent.
Stage 2: Authority to Proceed
• Your Local Help to Buy Agent checks you can afford your main
mortgage and ensures you have signed the declaration that the Help to
Buy home will be your only residence. This is to protect tax payers’
investment in the Help to Buy equity loan.
• If affordable, you will receive an “Authority to Proceed” from your Local
Help to Buy Agent within four working days of the house builder
submitting your fully completed Property Information Form and
reservation form to the Local Help to Buy Agent. This process may be
delayed if you do not fully complete your Property Information Form.
• You instruct a solicitor to act for you and tell your IFA so that a full
mortgage application can be submitted.
• The ‘Authority to Proceed’ will be accompanied by instructions to you
and your solicitor/conveyancer. This pack will include legal documents
that will be explained to you by your solicitor/conveyancer.
• You should only submit your main mortgage application once you have
the “Authority to Proceed” from the Local Help to Buy Agent.
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Stage 3: Mortgage offer and exchange of contracts
• Your solicitor/conveyancer will advise you and ensure you sign the sale
contract and the Help to Buy equity loan.
• Your solicitor/ conveyance will explain the legal implications of the
equity loan, that the Help to Buy home must be your only residence
and the consequences of a fraudulent application (see below).
• Your solicitor/conveyancer checks that your mortgage offer, property
price and available funds are consistent with the Authority to Proceed,
and requests permission to exchange contracts from the Local Help to
Buy Agent.
• Your Local Help to Buy Agent issues approval to your
solicitor/conveyancer and contracts are exchanged.
• You will have paid a deposit if required and are now legally contracted
to complete the purchase by an agreed date.
Stage 4: Completing the purchase
• At completion, your lender provides its funds and Homes England will
make its funds available to you via the house builder. Once completion
has taken place you own the property and can move in.
• Your solicitor returns confirmation of the sale to your Local Help to Buy
Agent who then registers your details with Homes England’s Mortgage
Administrator.
• A second charge is registered on your home by your solicitor in favour
of Homes England, entitling it to a share of the future sale proceeds.
The charge will be equivalent to the percentage contribution made
towards the purchase price. You must repay the percentage
contribution when you sell your home or after 25 years (whichever is
earlier).
The property purchased must be your only residence. Help to Buy is not
available to assist buy-to-let investors or those who will own any property in
the UK or abroad other than their Help to Buy property after completing their
purchase.
Y
ou cannot rent out your existing home and buy a second home through Help
to Buy.
Y
ou cannot purchase a Help to Buy property if you own land with resisidential
planning use.
You cannot purchase a Help to Buy home whilst your name is attached to the
deeds or if you will benefit financially from the future sale of a property even if
you do not live there.
M
arried couples own joint assets and therefore both parties are treated as joint
owners regardless of the mortgage/paperwork being in one or both names.
Applicants who make fraudulent claims for Help to Buy assistance will be
liable to criminal prosecution.
A
ll Fraudulent claims will always require immediate repayment of the equity
loan assistance.
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How long does the process take?
Once you find a property you want to buy, you need to reserve it and submit a
duly completed ‘Property Information Form’ to your Local Help to Buy Agent.
Your Local Help to Buy Agent will seek to assess your affordability (from a
fully completed Property Information Form) within four working days and will
issue an Authority to Proceed.
Your Local Help to Buy Agent’s ‘Authority to Proceed’ is valid for three months
– the time limit for exchange of contracts. Typically, most house builders will
be seeking buyers to exchange contracts within one month of making a
reservation. You must legally complete on your purchase within six months of
exchanging contracts.
You are responsible for securing your mortgage and appointing your
solicitor/conveyancer, although your Local Help to Buy Agent and house
builders will be able to suggest some options.
Further information
Help to Buy homes are only available from Help to Buy registered house
builders who are in contract with Homes England to offer homes for sale
through the Help to Buy programme.
Registered builders will make it clear in their advertising whether Help to Buy
homes are available on their development sites.
Your Local Help to Buy Agent can also help you find out more about
availability of Help to Buy homes in your area.
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Leasehold reform and Help to Buy Equity Loan. What does
this mean for Help to Buy homebuyers?
In December 2017, Government published the response to its consultation:
“Tackling unfair practices in the leasehold market”. The response can be
found in full here: https://www.gov.uk/government/consultations/tackling-
unfair-practices-in-the-leasehold-market
The Government believes that, other than in exceptional circumstances, there
are no good reasons for new build houses to be sold on a leasehold basis.
The Government has announced a package of measures to tackle abuses
and unfair practices in the leasehold market. These changes include bringing
forward legislation to stop the future development of new build leasehold
houses, other than in exceptional circumstances and to restrict ground rents
in newly established leases of houses and flats to a “peppercorn”. This will
apply to the whole new-build market, including the Help to Buy equity loan
programme.
All Help to Buy house builders are aware of this requirement but the longer
pipeline of development in place before the announcement means some
houses may still be offered for sale leasehold for a period of time before the
practice ceases.
The majority of Help to Buy new build house sales are already freehold and
Government intends that they should all be freehold in all but exceptional
circumstances. Leasehold can make sense for buildings with shared spaces
and infrastructure, such as blocks of flats. Almost all sales of Help to Buy flats
will continue as leasehold sales unchanged as is the usual practice for this
type of home.
If you intend to purchase a leasehold Help to Buy equity loan house you can
still proceed but, as with the purchase of any property, you are strongly
advised to take independent legal advice from your solicitor/conveyancer, and
pay particular attention to the terms of the lease before you contractually
commit to the purchase whether it is a house or flat/apartment. It is your
responsibility to do this. You can refer your solicitor/conveyancer to the link to
the Government’s response. You may also wish to get in touch with LEASE
via their website at https://www.lease-advice.org/
There is also further guidance in the QA section of this guide.
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Your mortgage
What is the minimum contribution I must make to my Help to Buy home
purchase?
Outside of London your minimum contribution must be 80% of the full
purchase price which can be made up from your mortgage and your cash
deposit contribution and any other savings.
Buyers must have a first charge mortgage for a minimum of 25% of the full
market value and always provide a minimum 5% cash deposit contribution
(5% of the full purchase price).
London Help to Buy requires a minimum contribution of 60% of the full
purchase price. This can be made up from your mortgage and cash deposit
contribution.
Buyers accessing the London Help to Buy equity loan must have a first
charge mortgage for a minimum of 25% of the full market value and always
provide a minimum 5% cash deposit contribution (5% of the full purchase
price).
The long term sustainability of your mortgage contribution will be assessed by
the Local Help to Buy Agent.
Your mortgage will be based on a multiple up to a maximum 4.5 times your
household income. Higher multiples cannot be approved by the Local Help to
Buy Agent under any circumstances.
Your Local Help to Buy Agent will also work to a guideline to ensure that your
monthly costs (mortgage, service charges and fees) are no more than 45% of
your net disposable income. Higher percentages cannot be approved by the
Local Help to Buy Agent under any circumstances.
With limited resources available, Government is seeking to assist as many
buyers as possible to buy with a Help to Buy equity loan. Therefore, if it
looks like you can already secure a c90% main mortgage you should think
carefully whether a Help to Buy equity loan is right for you. There may be
better options for you to consider and you should seek independent financial
advice about this.
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What is the legal mechanism that ensures Homes England receives their
correct share when the equity loan is repaid?
Homes England’s equity loan will be secured through a second charge
registered on your property title at Land Registry; this process will be
undertaken by your solicitor. This means your property cannot be sold in the
future unless Homes England’s equity loan percentage is repaid.
You must agree to the legal charge being secured on your home before your
purchase can be completed. Your Help to Buy equity loan also includes other
obligations such as the requirement for you to insure your property. Your
solicitor/conveyancer will advise you on the legal implications of your
obligations and these documents before they are signed.
What happens when I sell my Help to Buy home?
When you sell your Help to Buy home, (unless you have already chosen to
repay your Help to Buy equity loan) you will repay Homes England’s equity
loan simultaneously. So if you initially purchased with a 75% mortgage and a
5% cash deposit and have made no other staircasing repayments (see
Illustration 1 below), you will repay Homes England 20% of the value at the
time you sell.
The Mortgage Administrator will collect Homes England’s repayment.
You can sell your home at any time and an independent valuer must decide
what it is worth. Your property should be sold on the open market at the
prevailing market valuation. If you do sell your property for more than the
prevailing market value then the amount due to Homes England under the
equity loan will be their percentage value of the actual sale price. Homes
England will not agree to release its charge over the property for sales at less
than market value.
If there are any fees or interest outstanding, for example, interest arrears at
the time of selling, these must be paid before the sale is completed.
The Help to Buy equity loan must be repaid when you sell your home. You will
pay the costs of selling.
The illustrations below give examples of how the equity loan repayment is
calculated assuming a Help to Buy home starting value of £200,000 and a
buyer taking on a mortgage for 75% and paying a 5% deposit. Your
solicitor/conveyancer will be able to provide more illustrations when they
advise you on your purchase.
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Illustration 1a
Start of year
Estimated
annual change
in property
price %
Total property
Value
Help to Buy
home owner
your
entitlement to
80% of
property value
Homes
England
entitlement to
20% of
property value
1
+2
£200,000
£160,000
£40,000
2
+2
£204,000
£163,200
£40,800
3
+2
£208,080
£166,464
£41,616
4
+2
£212,242
£169,794
£42,448
5
+2
£216,846
£173,477
£43,369
6
+2
£220,816
£176,653
£44,163
In the example in 1a, if the buyer chose to sell their Help to Buy home at the
start of year six (after owning the property for five years) and assuming
property values increased by 2% every year, the buyer would receive an
estimated £220,816 from the sale. The buyer would then use this to settle
any outstanding balance on their main mortgage and to repay the £44,163
Help to Buy equity loan.
London Help to Buy example
The illustrations below give examples of how the equity loan repayment is
calculated assuming a London Help to Buy home starting value of £400,000
and a buyer taking on a mortgage for 55% and paying a 5% deposit. Your
solicitor/conveyancer will be able to provide more illustrations when they
advise you on your purchase.
Illustration 1b
Start of year
Estimated
annual change
in property
price %
Total property
Value
London Help to
Buy home
owner your
entitlement to
60% of
property value
Homes
England
entitlement to
40% of
property value
1
+2
£400,000
£240,000
£160,000
2
+2
£408,000
£244,800
£163,200
3
+2
£416,160
£249,696
£166.464
4
+2
£424,483
£254,690
£169,793
5
+2
£432,973
£259,784
£173,189
6
+2
£441,632
£264,979
£176,653
In the example above, if the buyer chose to sell their London Help to Buy
home at the start of year six (after owning the property for five years) and
assuming property values increased by 2% every year, the buyer would
receive an estimated £441,632 from the sale. The buyer would then use this
to settle any outstanding balance on their main mortgage and to repay the
£176,653 Help to Buy equity loan.
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What happens if property values fall?
Will I have to repay the full amount of Help to Buy assistance or just a
percentage of the total sale proceeds?
When you sell your home, (unless you have repaid the Help to Buy equity
loan document previously) the Help to Buy equity loan document commits you
to repay a percentage of the market value equal to the percentage
contribution of assistance received.
This means if the market value of your property falls below the level at which it
was first purchased, you will repay less than the original amount Homes
England contributed to the original purchase.
You must always show that the proposed sale value is at the prevailing
market value before going ahead. Homes England’s Mortgage Administrator
must approve the sale before allowing the second charge to be released.
As long as you have complied with all your obligations in the Help to Buy
mortgage deed, you will not be required to provide for any shortfall in the
equity loan repayment if you sell when values have fallen.
If you do not comply with the terms of the Help to Buy mortgage deed, Homes
England will seek to recover all the money they are owed. Your solicitor will
explain the Help to Buy mortgage deed to you before the property is
purchased.
Illustration 2a
Start of year
Estimated
annual change
in property
price %
Total
property
Value
Help to Buy
home owner
your entitlement
to 80% of
property value
Homes England
Help to Buy
entitlement to
20% of property
value
1
-5
£200,000
£160,000
£40,000
2
-5
£190,000
£152,000
£38,000
3
-5
£180,500
£144,400
£36,100
4
+5
£171,475
£137,180
£34,295
5
+5
£180,049
£144,039
£36,010
6
+5
£189,051
£151,241
£37,810
In the above example, if no capital repayment has been made on the main
mortgage, repayment of the £150,000 mortgage from sales proceeds would
leave £39,051 to contribute to the repayment of the £37,810 equity loan.
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London Help to Buy example
Illustration 2b
Start of year
Estimated
annual change
in property
price %
Total
property
Value
London Help to
Buy home owner
your entitlement
to 60% of
property value
Homes England
Help to Buy
entitlement to
40% of property
value
1
-5
£400,000
£240,000
£160,000
2
-5
£380,000
£228,000
£152,000
3
-5
£361,000
£216,600
£144,400
4
+5
£342,950
£205,770
£137,180
5
+5
£360,098
£216,059
£144,039
6
+5
£378,102
£226,861
£151,241
In the above London Help to Buy example, if no capital repayment has been
made on the main mortgage, repayment of the £220,000 mortgage from sales
proceeds would leave £158,102 to contribute to the repayment of the
£151,241 equity loan.
Can I redeem my equity loan in part, sometimes known as
“staircasing”?
The Help to Buy scheme allows you to repay all or part of your equity loan. A
partial repayment is often called “staircasing’.
Staircasing payments can be made at any time and must be a minimum of
10% of your home’s prevailing market value – whether that value is more or
less than when originally purchased. You may wish to check any additional
criteria with your current lender.
An independent valuer must provide a valuation of your property and you will
also be responsible for the associated administrative cost. Enquiries about
administrative costs should be made to Homes England’s Mortgage
Administrator.
If you decide to staircase after five years of ownership, the fees (see below)
you pay on your Help to Buy equity loan will reduce to reflect your smaller
outstanding loan percentage.
If you extend your mortgage to fund your partial repayment of Homes England
equity loan, your mortgage repayments will probably increase to reflect the
fact that you have repaid some of the equity loan. Homes England’s
Mortgage Administrator will need to approve any increase in your first charge
mortgage.
In the example below, the buyer chooses to staircase by 10% to reduce the
Homes England equity loan to 10% at the start of year six (after owning the
property for five years). Assuming property values increased by 5% every
year, the buyer would have to repay £25,526 to reduce the Homes England
equity loan to 10% based on the future property value.
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If the buyer has any outstanding equity loan fees at the time of staircasing,
these arrears must also be paid at the same time as the staircasing payment
is made.
Your solicitor/conveyancer will be able to provide more illustrations when they
advise you on your purchase.
Illustration 3
Start
of
year
Estimated
annual change
in property
price %
Total
property
Value
Help to Buy
home owner
your entitlement
to 80% of
property value
Cost to Help
to Buy
Home owner
staircasing
by 10%
After staircasing
Help to Buy home
your entitlement
to 90% of
property value
1
+5
£200,000
£160,000
Not applicable
Not applicable
2
+5
£210,000
£168,000
£21,000
£189,000
3
+5
£220,500
£176,400
£22,050
£198,450
4
+5
£231,525
£185,220
£23,153
£208,373
5
+5
£243,101
£194,480
£24,310
£218,790
6
+5
£255,256
£204,204
£25,526
£229,730
Are there any restrictions on the mortgage provider?
Your first charge mortgage must be from a qualifying lending institution.
These include lenders who are authorised under the Financial Services and
Markets Act 2000, and who have permission to enter into regulated mortgage
contracts. This is likely to include most banks and building societies.
The Financial Conduct Authority keeps a register of authorised persons on its
website. The register can be found at http://www.fca.org.uk/register/
Your solicitor/conveyancer will check that the lender is compliant before a sale
can proceed.
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Fees and costs
What are the monthly costs of Help to Buy?
Typically every month, you will need to make payments in addition to your
normal monthly outgoings, including:
• mortgage repayments to lenders
• Initial monthly management fee of £1 per month to be paid by direct
debit from the start of ownership until the loan is repaid
• after five years, interest fees on the Help to Buy equity loan (see
below)
• service charges, if you buy a house or flat with shared areas that
require maintenance
• council tax
• Life insurance
• buildings insurance
• utility bills and other costs of occupying the property.
How the interest fees are calculated on the Help to Buy equity loan?
If you have not repaid in full your Help to Buy equity loan after five years, you
will be required to pay an interest fee of 1.75% of the amount of your equity
loan at the time you purchased your property, rising annually from the fifth
anniversary of your equity loan by the increase (if any) in the Retail Price
Index (RPI) plus 1%. This fee is payable to Homes England’s Mortgage
Administrator.
The example below shows how interest fees are calculated. A monthly
management fee of £1 is paid from when you first purchase. The interest fee
payment is not made for the first five years. After this date a monthly fee will
be payable and the table below illustrates how this would work on Help to Buy
equity loan totalling £40,000.
Your solicitor/conveyancer will be able to provide more illustrations when they
advise you on your purchase.
Illustration 4a
Start
of year
Help to Buy
equity loan
assistance
Estimated
RPI %+1
Interest Fee
percentage
Annual interest
fee and
management
fee due
Estimated monthly
payment (interest
fee and
management fee)
1
£40,000
6%
0%
£12
£1
2
£40,000
6%
0%
£12
£1
3
£40,000
6%
0%
£12
£1
4
£40,000
6%
0%
£12
£1
5
£40,000
6%
0%
£12
£1
6
£40,000
6%
1.75%
£712
£59
7
£40,000
6%
1.86%
£756
£63
8
£40,000
6%
1.97%
£800
£67
9
£40,000
6%
2.08%
£844
£70
10
£40,000
6%
2.21%
£896
£75
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At the start of year six, after five years of ownership, the Help to Buy owner in
this example above has to pay a total monthly interest and management fee
of £59. At the start of year seven, after six years of ownership, the monthly
interest and management fee will have risen to £63.
London Help to Buy example
The example below shows how interest fees are calculated. A monthly
management fee of £1 is paid from when you first purchase. The interest fee
payment is not made for the first five years. After this date a monthly fee will
be payable and the table below illustrates how this would work on Help to Buy
equity loan totalling£160,000.
Your solicitor/conveyancer will be able to provide more illustrations when they
advise you on your purchase.
Illustration 4b
Start
of year
London
Help to Buy
equity loan
assistance
Estimated
RPI %+1
Interest Fee
percentage
Annual interest
fee and
management
fee due
Estimated monthly
payment (interest
fee and
management fee)
1
£160,000
6%
0%
£12
£1
2
£160,000
6%
0%
£12
£1
3
£160,000
6%
0%
£12
£1
4
£160,000
6%
0%
£12
£1
5
£160,000
6%
0%
£12
£1
6
£160,000
6%
1.75%
£2,812
£234
7
£160,000
6%
1.86%
£2,988
£249
8
£160,000
6%
1.97%
£3,164
£264
9
£160,000
6%
2.08%
£3,340
£278
10
£160,000
6%
2.21%
£3,548
£296
At the start of year six, after five years of ownership, the London Help to Buy
owner in this example has to pay a monthly fee of £234. At the start of year
seven, after six years of ownership, the monthly fee will have risen to £249.
The interest fee structure is intended to encourage you to staircase and move
to full ownership. The introduction of interest fees after five years also takes
into account that you benefit from living in your own home, made possible by
Homes England contributing part of the purchase price until your property is
sold.
The interest fee is not introduced until the start of year six, which means that
you have a five year period of low management fees (£1 per month) at a time
when many buyers are usually the most financially stretched.
The future rate of inflation cannot be predicted but you should assume your
interest fees will always rise. The examples shown above in illustrations 4a
and 4b assume annual inflation as measured by the RPI is 5% making the
annual fee increase by 6%, from 1.75% to 1.86%, in year seven.
In illustration 4a by the start of year ten, if the same rate of inflation is
maintained, the interest fee would be 2.21% equating to £75 per month based
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on the original equity loan totalling £40,000. The London Help to Buy
example in illustration 4b shows at the start of year ten the interest fee would
equate to £296 per month based on the original equity loan of £160,000.
Your annual interest fee will always increase by a minimum of 1% (from the
fifth anniversary of your Homes England equity loan) even if there is no
increase or there is a decrease in RPI.
Your payment of management and interest fees does not contribute towards
repaying your Help to Buy equity loan. If you staircase or want to make full
repayment of the equity loan, any interest fee arrears must be repaid at the
same time.
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Annual Percentage Rates (APR) for Help to Buy owners
Because you have to pay fees on your Help to Buy equity loan during your
ownership, and you may have to pay more than the original contribution back
to Homes England, the effect will be similar to a loan under which a buyer
pays credit charges at a rate dependent on the growth in house prices
combined with the percentage rates of fees payable.
The previous illustrations demonstrated separately the effects of house price
changes and fees on the costs a buyer would have to pay for 2 examples: A
Help to Buy purchase of a £200,000 market value home and mortgage and
contribution of 80%, and a London Help to Buy purchase of a £400,000
market value home and a mortgage and contribution of 60%.
The combined effect of fees and repayments affects the APR which is the
buyer’s cost of credit.
Using the previous illustrations of standard Help to Buy, after six years of
ownership, if the buyer decides to sell and house prices have grown for
example by 5% every year, the buyer will have to repay £53,604 on their
original equity loan of £40,000.
The owner will have also paid £700 in interest fees on the Help to Buy equity
loan. This means the total amount payable after five years on the Help to Buy
original assistance of £40,000 is £54,304.
Under the illustration of London Help to Buy, after six years of ownership, if
the buyer decides to sell and house prices have grown for example by 5%
every year, the buyer will have to repay £214,415 on their equity loan of
£160,000.
The owner will have also paid £2,800 in fees on the Help to Buy equity loan.
This means the total amount payable after five years on the Help to Buy
original assistance of £160,000 is £217,215.
For this example, this is equal to an APR 5.2% typical. The total amount
repaid is £54,304 or £217,215 under London Help to Buy. You should
remember this is an illustration. House price inflation, the Retail Price Index
and the fees and costs an owner pays could all vary substantially over time.
Your solicitor/conveyancer will be able to provide a further illustration of APR
when they advise you on your purchase.
As house values increase it may be in the Buyers interest to repay
Homes England as their financial position improves and makes this
possible.
Prospective buyers should always seek independent financial advice
before proceeding with their Help to Buy purchase.
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Additional Help to Buy equity loan administration charges
In line with other main mortgage lenders, Homes England’s Mortgage
Administrator will charge Help to Buy owners for loan redemption and other
loan transactions. These charges are set out below. There are no application
or other administration charges when buyers first make their Help to Buy
equity loan purchase. Similarly, there are no early redemption penalties
payable by Help to Buy owners.
Transaction
Administration charge
payable by borrower
(includes VAT)
Full or partial repayment of the Help to Buy equity loan
(including staircasing)
£200
Remortgaging of the main mortgage
£115
Additional main mortgage borrowing
£115
Changes of names
£50
Subletting or home improvements
£50
Arrears debt recovery charge
£100
Referral of unrecovered arrears to debt recovery agency
Up to £600
You can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
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Questions and answers
Q Can I buy a home off plan?
Yes, you are able to reserve a new home off plan at any time. However, you cannot
exchange contracts before six months to legal completion of the sale. You also need
to ensure that your mortgage offer is valid through to legal completion.
Q Will I have to pay Stamp Duty?
The Government’s standard rules and procedures for Stamp Duty Land Tax (SDLT)
apply to all Help to Buy purchases.
SDLT is payable at the time of purchase, on the full purchase price of the home. That
is, the amount paid by you (the first mortgage and any cash contribution) plus the
value of the Help to Buy assistance.
Ther
e is no further SDLT to pay on any ‘staircasing’ repayments or repayment when
the home is sold.
You should budget for SDLT on the full open market price of the property when you
purchase a Help to Buy home.
Q
Can I use a builder’s part exchange scheme?
No, Help to Buy purchasers cannot be used in conjunction with any part exchange
schemes.
Q Who pays for repairs and on-going maintenance to my home?
It is your responsibility to repair and maintain your home. New homes often come
with a guarantee that will cover certain defects for up to 10 years after it was built.
This guarantee usually only covers defects in the house builder’s workmanship. Your
solicitor/conveyancer will be able to advise in more detail on this.
Q
Who provides the contribution for Help to Buy?
The equity loan is provided by Homes England and administrated by your local Help
to Buy agent. The contribution is secured by a second charge on your property title
registered at Land Registry.
Q
How long will it take before I can move in?
Because Help to Buy homes are generally on new developments (and may still be
under construction), in common with most new home sales, you will normally be
expected to arrange a mortgage and exchange contracts within one month of paying
your reservation fee.
Y
our moving in date may depend on the time required to complete construction work,
which will vary from scheme to scheme. Some Help to Buy applicants may need to
wait for a longer period of time for a home that matches very specific needs whereas
others may buy from a development that allows earlier occupation.
Q
What happens if the completion of my home is delayed?
Once you have committed to buy a home (at exchange of contracts) the house
builder will have agreed to build the home and keep you informed of progress.
If you are unhappy about any delays in construction you must speak to the house
builder. Your solicitor/conveyancer will be able to advise on the house builder’s
contractual responsibilities before you agree to the sale.
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You should check with your house builder that the funding will be available on the
date you expect to complete your purchase
Q
Are there any restrictions on the properties that I can purchase?
All Help to Buy homes are on new build developments where Homes England has a
registration agreement with the house builder. You can only purchase from these
house builders. The maximum purchase price is £600,000.
Q I
would like to buy a Help to Buy house but the house builder tells me it is
only available on a leasehold basis. Should I stop my purchase?
It is your decision whether you are content to proceed with your purchase. A lease is
a private legal agreement between you and your landlord or freeholder and sets out
the rights and responsibilities of both parties. Homes England cannot provide legal
advice. We strongly recommend that you seek independent legal advice make
yourself aware of the terms of the lease and the associated costs. The Leasehold
Advisory Service have published guidance on what to look out for at
http://www.lease-advice.org/advice/leasehold-infosheets/
LEASE is a specialist advisory body funded by the Ministry of Housing, Communities
and Local Government to provide assistance to leaseholders. Alternatively, a
telephone appointment can be booked to speak to one of LEASE’s advisers on 020
7832 2500 (9.30am to 3.00pm Monday to Friday); or you can seek advice by e-mail:
info@lease-advice.org
A
s you may be aware, the Government has recently stated that other than in
exceptional circumstances, it cannot see the case for new build houses to be sold on
a leasehold basis and that it intends to bring forward legislation to prohibit the future
development of new build leasehold houses, other than in exceptional
circumstances.
M
ore FAQ on leasehold and Help to Buy is also available here:
https://www.gov.uk/government/publications/leasehold-reform-and-help-to-buy-
equity-loan
Q
Can I sublet my Help to Buy home?
No. Help to Buy is designed to assist you to move on to or up the housing ladder. If
you wish to sublet, you will first have to repay the Help to Buy equity loan assistance.
In exceptional circumstances (e.g. a serving member of the Armed Forces staff
whose tour of duty requires them to serve away from the area in which they live for a
fixed period, then sub-letting is allowed. In these circumstances you would also
require approval from your mortgage lender and Homes England’s Mortgage
Administrator). You can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
Q
Can I own other homes and buy a Help to Buy home?
No. Help to Buy is designed to assist you to move up the housing ladder and must
be your only residence. This means you will be expected to sell your current home
(in the UK or abroad) if moving up the ladder. The disposal of your current home will
be verified by your solicitor/conveyancer before you can proceed to exchange
contracts on the Help to Buy Home.
In addition you cannot be linked to another property financially. For the avoidance of
doubt, married couples own assets jointly and therefore if one owns a property the
other is directly linked to the asset and treated as a home owner also.
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Q Can I own a Help to Buy home and buy a second home?
No. Help to Buy is designed to assist you to move up the housing ladder. If you can
afford to purchase another home you will have to repay the Help to Buy equity loan.
Married couples also standardly by law own each other’s assets; therefore all assets
in a single name are treated as jointly owned in this scenario.
Q W
hat are the key differences between the Help to Buy equity loan offered
across England and the one offered in London?
The Autumn Statement in November 2015 announced an increase in the London
Help to Buy equity loan from 20% to 40%. The eligibility and requirements for the
programme otherwise have remained the same. The table below details the extent of
the changes.
Feature
Help to Buy
London Help to Buy
Maximum equity loan
available
20% of purchase price
40% of purchase price
Buyers cash deposit
5% of purchase price
5% of purchase price
Minimum mortgage
required
25% of purchase price
25% of purchase price
Maximum purchase price
£600,000
£600,000
The property purchased must be your only residence. Help to Buy is
not available to assist buy-to-let investors or those who will own any
property other than their Help to Buy property after completing their
purchase.
You cannot rent out your existing home and buy a second home
through Help to Buy.
Applicants who make fraudulent claims for Help to Buy assistance may
be liable to criminal prosecution.
Fraudulent claims will always require immediate repayment of the equity
loan assistance.
Q
Can I use cash from my council, Housing Association or other public sector
body to buy with the addition of help through Help to Buy?
Provided that your local council is satisfied that this represents value-for-money and
the other funding is compatible with Help to Buy. Funding provided which must be
secured against your home would not be compatible with the Help to Buy scheme.
Assistance from Local Authority Clearance Payments are not permitted through Help
to Buy.
Q
After purchasing my home, can I increase my mortgage or take out another
loan?
Not without permission from Homes England’s Mortgage Administrator. Further
advances must be approved by Homes England’s Mortgage Administrator.
A
dvances to be used for staircasing or repaying the equity loans will usually be
welcomed and approved. Advances for other purposes will be considered by Homes
England’s Mortgage Administrator on a case by case basis (see question below
regarding extending or altering the property).
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You can transfer your mortgage to another qualifying lending institution (see page
19), following prior permission from Homes England’s Mortgage Administrator.
However, you must ensure your new lender is informed that your home is a Help to
Buy property with a second charge entitling Homes England to a share of the future
sale proceeds.
H
omes England’s Mortgage Administrator may decline permission for further
advances or transfer to another lender if after assessment they consider you may be
putting yourself in an unsustainable financial position.
Y
ou can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
Q
Can I extend or alter the property?
Not without permission. Because Help to Buy is designed to help people move up
the housing ladder, you should consider repaying part or all of Homes England’s
contribution before making plans for improvements or alterations. This is because
Homes England is seeking to help future aspiring buyers and may use the proceeds
of these repayments to make more assistance available. Therefore, consent will not
usually be granted for significant home improvements. Homes England’s Mortgage
Administrator will act reasonably in considering any application and will review cases
of hardship if, for example, property modifications are required for a disability.
When your property is sold in the future, if improvements have been made with the
approval of Homes England’s Mortgage Administrator, these will be ignored when
your property is valued to work out how much should be repaid to Homes England.
Y
ou can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
Q
After five years of ownership how is the fee collected?
Fees can be paid in a single yearly payment or in monthly instalments. The monthly
management fee (£1) is always paid monthly by direct debit.
H
omes England’s Mortgage Administrator will collect your fees and interest by direct
debit. They will contact you at least a month before your fees are due, to set up (if
not already done so) your repayment arrangement.
Y
ou will also receive a statement each year confirming when your fees are payable.
The annual statement will also show any payments you have made once you start
paying the fee.
Y
ou can find out more about the Mortgage Administrator here:
https://www.myfirsthome.org.uk/
Q
What if I die after purchasing a Help to Buy home?
This depends on whether you bought your home alone or with others.
If you bought the house/flat on your own and you die, the home will be passed on in
the normal way under the terms of your will and the payments explained in this guide
will be made by your estate in accordance with the scheme. If you have not made a
will it will pass under the laws of intestacy.
I
t is recommended that a sole buyer seeks independent legal advice about this.
If you bought your home with others and one of them dies, their interest in the
property will either be transferred to the surviving co-owner (s) or will pass under the
terms of their will, or (if there is no will) the laws of intestacy.
It is recommended where there are two or more owners, that they seek independent
legal advice about this.
Q Can owner names be added or changed on the Help to Buy property?
The policy for post sales transactions can be found on the mortgage administrators
website after the point of sale. Policy can change due to regulatory decsions linked
to second charge loans. It is crucial tht you check with the mortgage administrator
regarding any post completion requirments prior to starting any processes. Currently
at the time of publication owners can be removed from equity mortgage but new
names xannot be added this is due to this being classed as a new lending decision.
Q Can I get help with benefits to pay the Help to Buy fees and interest if, for
example, I lose my job?
Because Help to Buy fees and interest are not classified as rent, they do not qualify
for Housing Benefit. You should make sure you have made arrangements to ensure
you can continue to make you Help to Buy payments if your income falls. You should
seek independent financial advice about this before purchasing a Help to Buy home.
Q What happens if my partner moves out and no longer wants to be party to
the equity loan agreement?
Homes England’s Mortgage Administrator will be able to arrange for a ‘Deed of
Release’ which will release your partner from the obligation of having to repay the
equity loan. Assuming that your first charge mortgage lender is content for this to
take place and that you are able to provide evidence that you can meet your housing
costs and still have a reasonable standard of living, permission should be a formality.
As previously stated this is the policy at the time of publication, regulations can
change and it is important to check with the mortgage administrator regarding any
post completion requirements.
Q Who is the Mortgage Administrator?
The Mortgage Administrator is the agent appointed by Homes England to provide
post-sales services in relation to your Help to Buy equity loan (such as collection of
fees, processing of requests for redemptions, etc.) after you have purchased your
home. The Mortgage Administrator is also referred to as the ‘Post Sales Agent’.
Contact details for the Mortgage Administrator and a summary of its services will be
provided to you after completion. You can find out more about the Mortgage
Administrator here:
https://www.myfirsthome.org.uk/
For all enquires relating to the reservation and purchase of a property with Help to
Buy equity loan up to the point of sale completion, you should contact your Local
Help to Buy Agent.
Find your Local Help to Buy Agent
To find out the nearest location of Help to Buy homes in your area, you should
contact your Local Help to Buy Agent.
Go to http://www.helptobuy.gov.uk/equity-loan/find-helptobuy-agent to locate
them on the map. All contact details can be found on the website.
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