Help to Buy Equity Loan Questions

swebb99

Hi,

I phoned my local (Midlands) help to buy dept today for some information but I suspect I may have been given the wrong information as the person I spoke to really didn't seem to answer my questions with any confidence. So I am here looking for some possible clarification.

1) I thought that as a first time buyer that not only could I get a 20% equity loan on a new build property but on existing properties as well, the local dept told me the loan was only available on new builds!

2) I asked for some clarification on the 20%, was it 20% of the property value or 20% or the amount I took out on mortgage. I was told it was 20% of the mortgage but from what I have read I thought it was on the property price.

3) I asked if it was possible to obtain the 20% loan even if no mortgage was required, hence putting a 80% deposit down, the person I spoke to did not seem to know. I also asked about putting down day 60% where I would stand, again they didn't know.

4) I asked what happened if I paid back the 20% before the 5yrs was up, say 4yrs 11 months. I was told that I would have to pay back the interest! I questioned that and said the site implied that the loan in this case would be interest free and no fee's would apply they told me this was not the case. When I asked what the rate of this mysterious interest was they said that they could not give me financial figures and I would need to speak to a financial adviser !!!

5) Concerning question 4 I was also told that any valuation increase in the property would mean I would have to pay back 20% or the new valuation even if I paid the 20% before 5yrs matured. This again doesn't seem to be clarified in any text I have read on the subject.

Any ideas ?

Cheers

pickles13

I am not much help but I also thought that the 20% equity loan was on new build and existing but apparently not, new build only. We went for help to buy guarantee scheme in the end, as that is for existing builds.

leelou905

I would really like to know the answers to these questions too! I also thought that it was 20% of the property price, not mortgage.


And also considered paying off the 20% early within the interest free period, makes no sense that you would pay interest when it states on the Gov website that there is no penality for paying lump sums early and that the first 5 years are interest free..


Unless you pay interest on what would be the remainder after the 5 year period was up...

Ads1982

Okay

As somebody who has used this scheme let me see if I can help. Please note I am not a mortgage or financial advisor and my answers are based on my understanding of the scheme.

1) It is only available on new builds. Without speculating I think the point of the scheme as well as assisting new home owners was also to stimulate house building.

2) They will means assess you and you will qualify for a loan of either 10% or 20% of the property value. i.e £200k house - you would need a minimum 10k deposit and could then qualify for a 40k loan with the other 150k being from a mortgage.

3) I am not sure on this. You need to provide a minimum of 5% deposit yourself. When I read my literature I don't remember them saying there was a maximum though.

4) They are incorrect. No interest is chargeable until the start of year 6. It will be 1.75% in year 6 and will then increase gradually year on year. If you sell before then all you will pay back is 20% of the property value.

5) They are correct on that. You have to pay back 20% of the property value (if you've borrowed 20% equity loan) at the point of sale whether that is the day after you complete or 4 years or 10 years etc. Conversely, if the property value goes down you could in theory end up paying back less than you borrowed.

Hope that helps.

Cheers

kingstreet

swebb99 wrote: »

1) I thought that as a first time buyer that not only could I get a 20% equity loan on a new build property but on existing properties as well, the local dept told me the loan was only available on new builds!

HTB - Equity Loan is newbuild only.

2) I asked for some clarification on the 20%, was it 20% of the property value or 20% or the amount I took out on mortgage. I was told it was 20% of the mortgage but from what I have read I thought it was on the property price.

The equity loan is either 10% of the property purchase price or 20% of the property purchase price, your choice.

When you repay, you repay based on the property value at the time, not the amount in £ you borrowed originally.

3) I asked if it was possible to obtain the 20% loan even if no mortgage was required, hence putting a 80% deposit down, the person I spoke to did not seem to know. I also asked about putting down day 60% where I would stand, again they didn't know.

The minimum deposit is 5% and the minimum mortgage is 25%. You could put down 55% deposit, get a 25% mortgage and 20% equity loan.

4) I asked what happened if I paid back the 20% before the 5yrs was up, say 4yrs 11 months. I was told that I would have to pay back the interest! I questioned that and said the site implied that the loan in this case would be interest free and no fee's would apply they told me this was not the case. When I asked what the rate of this mysterious interest was they said that they could not give me financial figures and I would need to speak to a financial adviser

You only pay fees (not interest!) in year six and onwards. Regardless of when you repay the loan, the repayment is based on the property value at the time of repayment.

5) Concerning question 4 I was also told that any valuation increase in the property would mean I would have to pay back 20% or the new valuation even if I paid the 20% before 5yrs matured. This again doesn't seem to be clarified in any text I have read on the subject.

That is correct.

http://www.helptobuy.org.uk/docs/default-source/default-document-library/help-to-buy-equity-loan-buyers-guide.pdf?sfvrsn=4

swebb99

Thanks for the replies they have been very useful. It's obvious that my understanding wasn't clear hence making the call and also that the person I spoke to wasn't 100% clear on the answer either which is concerning!

So is there another scheme for buying none new build properties ?

kingstreet

HTB - Mortgage Guarantee.

No equity loan, just more mortgages of 90% to 95% due to Government guarantee helping lender to reduce risk.

swebb99

Ah OK thanks. I don't really want to get in to the high mortgage % levels as that just doesn't sit right with my natural savers attitude to life (probably not the norm now!). I was kinda hoping there might be some help for someone who had save a fair amount towards a property but was not quite there yet.