How does Help to Buy Work?
The government created the Help to Buy scheme to assist first-time buyers in the United Kingdom. The government loans money to first-time buyers so they can purchase a new build home and get on the property ladder.
The help-to-buy scheme allows your house deposit only needs to be 5% of the property price, and you can borrow up to 20% of the purchase price. For the first 5 years of having the equity loan, there is no interest, however, in the 6th year, you start to be charged for interest.
After you have brought your first home through the Help to Buy equity loan, there will come a time where circumstances change, where you are looking to re-mortgage, repay or sell your property. To do this, you will need a help to buy valuation report.
What is a Help to Buy Valuation?
A RICS valuation for help to buy is needed so that it will determine the repayable amount in direct proportion to the current market value of your property.
The help-to-buy loan must be repaid after 25 years or even sooner depending on when you decide to sell your house. You might decide to pay off the loan sooner or re-mortgage before the required repayment period begins. It’s important to remember that the amount you’ll have to repay will be based on the property’s value at the point of repayment and not the original property purchase price.
Choosing to re-pay your loan before it is mandatory can either be beneficial to you or not. if the market value of your property has declined after the initial purchase, choosing when to pay back your loan on your terms can be beneficial. If the value of the property has risen, on the other hand, you will end up paying more than you borrowed.
The government’s support to buy scheme is a fantastic program, but it’s crucial to consider what happens after you’ve purchased your home through the scheme, not just before.