London Help to Buy

What is London Help to Buy

It’s a government programme that lets homebuyers borrow up to 40% for the purchase of a newly-built home. If you’re applying, you’ll need a minimum deposit of 5% and to take out a mortgage on the remainder.

What properties are eligible for a London Help to Buy loan?

To be considered for a London Help to Buy loan, you need to make sure that the home you want to purchase is:

  • a new build in London, registered as a Help to Buy home
  • the only property you own
  • valued at up to £600,000
  • your main residence – you cannot sublet it or rent it out

How does it work?

You need to have set aside a deposit of at least 5% of the value of the property you’re buying. The government then provides you with an equity loan which is 40% on the purchase price of your home. You’ll need a mortgage on the rest of the payment.

An example

For example, to purchase a property worth £400,000, you might:

  • Pay a deposit of 5% (£20,000)
  • Receive a 40% government loan (£160,000)
  • Pay the remaining 55% on a mortgage (£220,000)

Does the loan involve any other fees?

You’ll have to pay a monthly management fee of £1, which is applicable from the purchase date. The government loan is free from interest for the first five years. After that, you’ll be charged a fee of 1.75%, which increases yearly according to inflation – as measured by the Retail Price Index (RPI) – plus an additional 1%.

When do you have to pay the loan back?

You’ll have to pay the equity loan back after a maximum of 25 years. If you’re selling the property or redeeming the mortgage before the 25-year mark, you’ll have to repay the loan beforehand.

Does applying for a loan mean that you’ll be guaranteed a mortgage?

No, a lender assesses your ability to make your mortgage repayments. In order to get an idea of what the lender will see when reviewing your borrowing history and to get an indication of how they may view your creditworthiness, you can check your Equifax Credit Report & Score It’s free for the first 30 days, then £14.95 monthly after that.

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