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Help to Buy Scheme

Looking to buy a new home but only have a small deposit? The government-backed Help to Buy Scheme can help you to get on the property ladder and own your own home.  The scheme allows buyers to get a new build property with a deposit as little as 5%.

When buying a new home, you must complete the legal ownership process known as conveyancing.

At Banner Jones, we have a wealth of experience dealing with conveyancing under the Help to Buy scheme. We explain the entire process in a straightforward and uncomplicated manner.  For a free, no obligation quote call 0330 017 6309

How the Help to Buy Scheme works

You need a 5% deposit to qualify. The government will provide you with a 20% deposit that is interest-free for the first five years. However, after five years you will pay a monthly administration fee.

The equity loan from the government must be paid off in full, by one of the following terms whichever happens first:

  • After 25 years
  • At the end of your mortgage agreement
  • When you sell your home

On an equity loan, you will always pay the same level of interest rate. However:

  • If your property increases in value, you will pay more money back.
  • If the property loses value, you will pay less back than you borrowed.

For more information on the help to buy scheme, contact our team of specialists in Chesterfield, Dronfield, Mansfield and Sheffield  on 0330 017 6309

Key Facts On The Help To Buy Scheme

  • The loans are available on new build properties only
  • It is open to both first time buyers and people who have a property to sell
  • It must be the person’s main residence. It cannot be a sublet or be a second home
  • You cannot keep your existing property and let it out
  • You must take out the standard first mortgage with a qualifying lender
  • There is no higher income threshold
  • The maximum purchase price is £600,000
  • The loan will be repaid on the sale of the property or after 25 years, whichever comes first. You can also make voluntary repayments

The Help To Buy Scheme Process Explained

Homebuyers can now consider whether to take advantage of the second phase of the Government's Help to Buy scheme, brought in three months early in a bid to help revive the property market.

Phase 2  is available to existing home-owners looking to move to any type of property, not just first-time buyers. The buyer must still put up at least a 5 per cent cash deposit, but the Government no longer lends actual cash to the buyer. Instead, it guarantees up to 15 per cent of the mortgage granted so that, if the borrower defaults and the property is repossessed and sold for less than the balance of the mortgage, the lender can apply directly to the Government for repayment under the guarantee.

The buyer needs to contribute a cash deposit of 5 per cent of the purchase price, and to satisfy the lender's usual checks. The aim is to reduce the risk to lenders so that they can offer cheaper interest rates to buyers. The lender pays the Government a fee for its guarantee.

The property must be worth less than £600,000, and borrowers must not own any buy-to-let properties or intend to keep the home they currently live in after the purchase.

Help to Buy Home Scheme Example

In an example where you purchase a £200,000 home under the help to buy scheme, the agency’s contribution of the equity loan totals £40,000 or 20% of the purchase price. You will be required to produce a 5% deposit of £10,000 and a mortgage of £150,000.

The equity loan is interest free for the first 5 years. After 5 years you pay a fee of 1.75% rising annually by the increase in the retail price index plus 1%. In year 6 on the previous example of £40,000 this would be approximately £58 a month.

97% of our clients would recommend us to a friend
(Ongoing Client Survey)

The service I received couldn't have been better!

Mrs C, Chesterfield

The receptionist staff on both days we visited your office were extremely friendly and the whole experience of dealing with Banner Jones was wonderful

T Howard

The service I received was excellent.

Mrs B, Dronfield

I received excellent service for the purchase of my house

Mrs S,Sheffield

Lovely thanks for the effortless sale

 

Mr S, Sutton in Ashfield

Hi Sandra

I've just finally had a moment to make myself a cup of tea and let the dust settle!  I just wanted to say, thank you so much for all your help and patience with me over the last few months. It took a long time to get there with the mortgage but you helped me out so much to get it pushed through quickly at the end!   I would certainly recommend you to any of my friends who want to buy a house in the future. You have done a fantastic job, thank you :-) 

Miss W, Chesterfield

Karen Askew and Nathan Rodgers did a fantastic job for us. Professional advice, speedy service and competitive pricing. Very happy.

Mr G, Derby

The service was excellent. We were particularly impressed by the swift responses and communication by email. A far superior service than our previous moving experience.

Mr P, Eastbourne

We’re really grateful for the work you did for us. 10 out of 10!

Mr & Mrs S, Bridlington

Very easy to make appointments, very personal service from all people at Banner Jones, my solicitor was very friendly and put me at ease. If I needed a solicitor again, Banner Jones would be the first on my list.

Mr C, Dronfield

Frequently Asked Questions

At what point in the process is it legally binding?

You can withdraw from a sale or purchase up until the point contracts have been exchanged. Any deposits paid after exchange of contract will then by non-refundable. After contracts are exchanged you are then responsible for the property you are buying and should arrange suitable insurance from this date.

How long are local searches valid for?

A local authority search completed for a house purchase is valid for 3 months.

How long does the conveyancing process take on average?

We usually say 4-6 weeks for an average sale or purchase. Queries and concerns can often come out of the local authority searches which need further investigation and sometimes this leads to re-approval from the Mortgage lender. This can add further time into the process.

What happens if we can’t produce certificates for work we’ve had done on the house we’re selling?

You can indemnify the work by taking out an insurance policy. This means that you can not be held liable for any future fault on the work that was done. We can arrange this for you

What is Stamp Duty and how much will I have to pay?

Stamp Duty is a tax levied by HM Government on a transfer of property. For residential property this tax is calculated at 1% for property values between £125,001 and £250,000, 3% for values between £250,001 and £500,000 and 4% for those of £500,001 and over. Duty may also be chargeable on any rental charge (leases only) - this affects both residential and commercial leases where different thresholds are applied.

What is the difference between Joint Tenants and Tenants in Common?

Tenants is Common is where two or more people are entitled to the proceeds of sale in distinct shares - on the death of one, his/her interest will not pass to the survivor(s) but will be part of his/her estate. Joint Tenants are on the other hand 50/50 Co-owners of land - when one of them dies, his/her rights of ownership pass to the survivor(s).

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How to Buy a Help to Buy Home

Stage 1 - Application

An application needs to be made to the local help to buy agent. The application includes a Property Information Form which shows details of the proposed purchase, main mortgage, deposit and household income. The Property Information Form also confirms your agreement to the funds due being paid directly to the house builder.

You will need to sign the Property Information Form with a copy of the Builders Reservation Form which must be sent to the local home buyer agent.

Authority to proceed

The local home buyer agent assesses the application and if passed they will issue an authority to proceed. This is valid for 3 months and exchange of contracts must take place within this period.

 Stage 2 - Exchange of Contracts

You will need to go through the normal conveyancing process with regard to the property but you will also need legal support with the signing of the help to buy equity loan agreement.  Banner Jones can help you with this.

We will need to check that the mortgage offer, property price and available funds are consistent with the authority to proceed and request permission to exchange contracts from the local home buyer agents.

An approval is received before contracts can be exchanged.

Stage 3 - Completion

  • The agents pay the funds direct to the developer.
  • We return confirmation of the sale to the local home buyer agent who will then register the details with the post sale home buyer agent.
  • We deal with the registration of the second charge. ie, the loan

Sale of the Property

Consent from the post sale home buyer agent is required and the agencies mortgage will only be released with their permission. Their main concern is that the sale of the property is at the correct market value and they can request an independent valuation to ensure this.

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What happens after 5 years?

When you have had your Help to Buy loan for 5 years you will need to start to pay back the interest. There are a few options open to you at this stage and we can discuss with you which might be the best one.

Options

  • Do nothing and start to pay the additional interest, however, if your house has significantly increased in value over the first 5 years this maybe more than you thought.
  • Pay off the balance due to Help to Buy from your savings if you have enough.
  • Pay off the balance due to Help to Buy by re-mortgaging your property.
  • Pay off the balance due by selling the property.
  • Pay off part of the balance by “staircasing” which means that you will reduce the Help to Buy stake in your property from 20% to 10% for example. If your house has increased in value this would be a sensible option so that you would then own more of the property's equity than before.

At Banner Jones we’ve devised a simple fixed fee Help to Buy service for anyone who needs their legal ownership updating. For £350 plus vat we will help you decide which option is best for you, take your instructions, arrange a valuation from a Chartered Surveyor if you need help with this (payable to the surveyor), and deal with all of the Help to Buy paperwork. We can also assist with a mortgage broker as well if you need assistance with a re-mortgage.  There will also be a small fee payable to the land registry to update the ownership.

If you are in a position to pay off the full equity loan in year five or six, that’s great,  but don’t be put off opting for a Staircasing payment if that’s more manageable. It’s a relatively simple process, and it means that another 10% of the value of your property belongs to you, and you alone. For more information on our Help to Buy service speak to the central quotes team on 01246 560 560 . We have specialists in our offices in Sheffield, Chesterfield, Dronfield and Mansfield.

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Chris Sellars
Chris Sellars
Head of Residential Property
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