Owning a home is a big step in anyone’s life. It can feel overwhelming at times. However, with the government’s Help to Buy scheme, you could be closer to owning your own home than you thought you were.
Help to Buy was made to help first-time buyers take their first step onto the property ladder. It helps with the cost of a new build home. There are two main options, and we’ll explain them here:
- Has the ‘Help to Buy’ scheme finished?
- What’s the equity loan?
- How do you pay back the equity loan?
- Equity loans and home improvements
- Am I eligible for an equity loan?
- What’s shared ownership?
Has the Help to Buy scheme finished?
You might ask, ‘hasn’t Help to Buy finished?’ Well, not exactly. While the original Help to Buy scheme has ended, it was replaced by two new schemes: Equity Loan and Shared Ownership.
So, don’t worry. Your new home is still within reach! We’ll help you understand how to get it.
What's the equity loan?
Buying a home can be a huge step, especially for first-time buyers. If you have your heart set on a new build home, Help to Buy: Equity Loan may be just the thing for you. The scheme helps first-time buyers afford the cost of a new build and it’s perfect if you’re looking to find a house that you can turn into a home.
Here’s how the scheme works and what you need to qualify:
- It’s a loan from the government to help you buy a new build home
- You can borrow between 5% and 20% of the price (up to 40% in London)
- You’ll need a mortgage deposit of at least 5%
- You must buy from a home builder registered with the scheme
- The amount you pay depends on where in England you buy.
These conditions apply to homeowners in England. But, if you’re from Scotland, Wales, or Northern Ireland, don’t worry. There are other guidelines to make sure a new home is within reach for you, too.
How do you pay back the equity loan?
Remember this is a loan, and you’ll need to plan how you’ll pay it back, over your loan term. Fortunately, the process is simple enough to follow. Your payments in the first five years are different from after that.
We’ve broken it down, so you can get a better idea of how you’ll pay it back
First five years:
- You don’t pay anything towards the loan
- It’s interest-free
- You pay a small management fee of £1 each month by Direct Debit
Year six onwards:
- You still pay the £1 fee
- You start paying interest at 1.75% of the loan’s value
- Your interest rate will rise each year in April, based on the Consumer Price Index (CPI), plus 2%
- You keep paying interest until you pay back the loan.
As with any agreement, there are a few conditions to your borrowing. Your loan must be repaid in full, including management fees and interest:
- By the end of your agreed loan term
- When you pay off your mortgage
- When you sell your home
- If you’re asked to repay the loan in full due to breaking the terms of your equity loan contract.
Of course, it’s possible that things can get out of your control. That’s why it’s important to be in complete control of your loan. Make payments for what you can, when you can, without the pressure of a fixed monthly schedule. As long as the loan is paid in full before your agreement ends, you decide when to pay.
Improvements to your home
If you’ve made changes to your home, like remodelling the interior, fitted your dream kitchen or bespoke bathroom. Or maybe given your garden a makeover to make it your own little slice of peace and quiet. That’s great! But remember, the amount you pay back depends on your home’s value when you sell it.
If your improvements increase its value, you’ll need to pay back a bit more.
Am I eligible?
At AXA, we believe everyone should have a chance to own a home. That’s why we see the government’s Help to Buy: Equity Loan as a great option. It makes it easier for many people. But, to qualify, you must:
- Be a first-time buyer
- Not already own a home or residential land now or in the past – this includes in the UK and abroad (also applies to anyone you’re buying with)
- Not have any form of sharia mortgage finance
- Buy a new build from a Help to Buy registered builder
- The home must be priced within a price cap determined by region
- Married couples or those in a civil partnership need to apply together
- You must be able to afford the monthly fee and interest repayments
- The home must be for you to live in.
What is shared ownership?
If the Help to Buy: Equity Loan scheme isn’t right for you, the government also offer a shared ownership scheme that may suit you better. This helps homebuyers who can’t quite afford the mortgage on 100% of their home’s value. You buy a part of the home (between 25% and 75%) and pay rent on the rest. Over time, you can buy more shares if your finances improve.
You’re eligible to buy a home through Help to Buy: Shared Ownership in England if…
- Your household earns less than £80,000 a year outside of London, or less than £90,000 a year in London
- You're a first-time buyer
- You've owned a home in the past but can’t afford to buy one now
- You're an existing shared owner looking to move.
Shared ownership makes homeownership possible for those who would otherwise struggle to make that dream a reality. Now, you have various options, such as owning a new build home or one sold through resale programmes from housing associations. But you’ll still need to take out a mortgage to pay for your share as normal.
In most cases, military personnel have priority for shared ownership. Local councils may also have their own rules based on housing needs.
AXA home insurance is here for you
No matter how you go about buying your own home, AXA is here to help first-time buyers. Once you move into your new home, we’re still here for you. Thanks to our home insurance, while you’re popping the bubbly in a toast to your new home, you can rest easy knowing AXA has you covered.
