Help to Buy – a general overview…

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Help to Buy is the name of a government programme in the United Kingdom that aims to help first time buyers and those looking to move home, to purchase residential property. It is open to both first-timer buyers and home movers – but it is restricted to new-build homes with a value of up to £600,000.00.

Under the scheme, you are only required to raise 5% of the property value as a deposit. Homes England, a government body, will contribute a loan of up to 20% (or 40% in London) through the Homes and Communities Agency (HCA).

For the first five years the government loan is interest-free. In year six, you will be charged 1.75% which will increase at a rate of 1% of that figure plus any increase in inflation (as measured by the Retail Prices Index (RPI)), every year thereafter.

The loan will have to be repaid within 25 years but you choose to repay the equity loan at any time, without a penalty. You can pay back either 10% or 20% of the total amount, so long as the loan is worth at least 10% of the value of your home.

If you don’t repay the equity loan while you are still living in the property, when you come to sell it, the government will reclaim its original percentage contribution in your home of its current market value at the time of sale. Therefore if the value of your property has increased at the time you come to sell, you will repay the percentage of the current market of the property and not what you originally paid for the property and borrowed. The amount you repay depends on the value of your property at the time of sale.

Once you have reserved your new build property, you will need to complete a Help to Buy Property Information Form (PIF). You must complete this with details of your proposed purchase, your proposed main mortgage, deposit and you must include your household income. Included in the PIF will be a direct debit form, which you need to fill in to pay a monthly £1 management fee to the post sales agent. The PIF will also confirm your agreement to the funds being paid directly to the house builder to enable them to reduce the full purchase price of the property. The signed PIF and a copy of the builder’s signed reservation form must then be sent to your local Help to Buy Agent.

After the HTB Agency receive the Property Information Form (PIF) they will check that you are able to afford your main mortgage and make sure you have signed the declaration that states the Help to Buy property you want to purchase is your only residence. If you fit the eligibility criteria for Help to Buy, you will receive an ‘Authority to Proceed’ (ATP) from them within four working days of submitting your PIF and reservation form. This process may be delayed if you do not fully complete your PIF.

Before the ATP can be issued you will need to instruct your solicitor so their details can be included on the form The ATP will be accompanied by instructions to you and your solicitor/ conveyancer. The pack will include legal documents that will be explained to you by your solicitor/conveyancer. Once you have received your ATP, you (or your mortgage broker) will be able to make a full mortgage application.

Your Authority to Proceed is valid for 3 months from the date of issue. In most normal situations this should cover the period when you get your Help to Buy Mortgage in place – i.e. you get your mortgage offer for your Help to Buy property – and when your solicitor gathers together the mortgage offer, valuation and Council of Mortgage Lenders form (which lists any incentives the developer has offered you such as, for example, white goods or paying your stamp duty – this should not be more than 5% of the value of the property.)

 

Once your solicitor has sent back all these documents to your Help to Buy agent, the agent, if satisfied, then issues your solicitor with an Authority to Exchange (ATE), which allows you to proceed to the next stage of the Help to Buy conveyancing process, Exchange of Contracts. The ATE is valid for a maximum period of 28 days from being issued and completion must take place within 6 months of the same.

 

Before completion your solicitor will apply for a Confirmation to Provider (CTD) which is confirmation to your Help to Buy agent that the matter is ready for completion and that no information has changed from when the ATE was requested/issued. Completion cannot take place without the CTD and as there is usually only 10 working todays to complete in, your Help to Buy agent has a turn around of 2 working days. Once the CTD and completion is confirmed the help to buy funds will be directly released to the builder’s nominated agent or solicitor.

 

For further in depth details and information please refer to the Help to Buy website on www.helptobuy.gov.uk

 

 

If you are looking to buy a new home or just want a chat about the process of buying a new build home contact Prabjoth or Senay at Meaby & Co for timely advice at pbassan@meaby.co.uk / stalat@meaby.co.uk or call 0207 703 5034.