Help to buy - Home equity loan - Questions

jimbo1982

Hi,

I am currently selling my property to buy a new build. I am interested in the Government Home Equity Loan scheme there are a couple of things which I have read conflicting information about and wondered if there was someone who knew the details and could answer my questions.

Is it correct that the maximum deposit you can put down is 30K?

If buying a place for 500K and getting 100K for the equity loan, plus 30K deposit from me I will need a 370K mortgage. Does the mortgage have to be over 25 years or can it be over 30 years?

After completion can I pay money off the mortgage (assuming the lender has no fees etc) without affecting the equity loan?

Before the 5 year interest free period is up I know I can pay off the equity loan, do I just pay off the 100K or do they still need to value the property to see whether it has gone up in value? If it has gone up by 5% I assume I have to pay back 105K? How do they value the house if this is the case? Obviously valuations don't always relate to the amount you could/would sell it for?

Finally I know to get the equity loan you can't have another property does this apply even if it were only for a few months? i.e. If I wanted to stay in my current property until I had the new one, could I still get an equity loan while selling my existing property a month or two after completion of the new build?

Thanks

James

witchy1066

I could be wrong but from what I have read on this forum you would have to sell your house at the same time as buying the new one to qualify for the equity loan scheme , you will not be eligible for the scheme while you own a property but am sure others will be along soon the verify this

leveller2911

Why do you feel the need to use the scheme when you already have a property?.

kingstreet

jimbo1982 wrote: »

Hi,

I am currently selling my property to buy a new build. I am interested in the Government Home Equity Loan scheme there are a couple of things which I have read conflicting information about and wondered if there was someone who knew the details and could answer my questions.

Is it correct that the maximum deposit you can put down is 30K?

No. That is not correct. You can put down as much as you want as long as you don't "underborrow" when you can afford a bigger mortgage. The minimum mortgage is 25%, but if your affordability indicates you can afford a higher mortgage, you'll be expected to take it.

If buying a place for 500K and getting 100K for the equity loan, plus 30K deposit from me I will need a 370K mortgage. Does the mortgage have to be over 25 years or can it be over 30 years?

It can be as long as affordability requires. We've done 35 year terms on several occasions.

After completion can I pay money off the mortgage (assuming the lender has no fees etc) without affecting the equity loan?

Yes.

Before the 5 year interest free period is up I know I can pay off the equity loan, do I just pay off the 100K or do they still need to value the property to see whether it has gone up in value? If it has gone up by 5% I assume I have to pay back 105K? How do they value the house if this is the case? Obviously valuations don't always relate to the amount you could/would sell it for?

If you get a 20% equity loan, you repay 20% of the property value at the time. The value is set by a chartered surveyor.

Finally I know to get the equity loan you can't have another property does this apply even if it were only for a few months? i.e. If I wanted to stay in my current property until I had the new one, could I still get an equity loan while selling my existing property a month or two after completion of the new build?

No. Your property has to be sold before, or on the same day as the new purchase is completed. No overlap is allowed.

Post-sale HTB guidance;-

http://www.myfirsthome.org.uk/content/1/122/help-to-buy.html

jimbo1982

kingstreet - Thank you very much for your detailed answer. It is really helpful.

leveller2911 - I only wanted to look at the options of staying in my home up until the new build is ready. Due to exchange/completion conditions the developer has it is too difficult to sell my property and complete on the new build at the same time. I am trying to avoid selling my property first so I don't have to rent. If you question was more general and you are wondering why I need to use the scheme, I don't in reality but it is a good deal available to first time buyers and home movers so why not.

kingstreet

Just make sure you have an exit strategy, as the equity loan is repayable as mentioned, as a percentage of the property value and becomes more expensive each year from year six as the fee rises with RPI + 1%pa.

There comes a point where the mortgage rate will be lower than the Government fee and you need to be able to repay/remortgage at that time.