Trying to get a foot on the property ladder can be a struggle for many people. Often with university debt stacked behind you and a low paid, entry level first job, saving enough money to put down a deposit is a common problem.
The government has introduced a number of different Help to Buy schemes, all aimed at those struggling to get to where they want to be on the property ladder.
Help to Buy: Equity Loan
This scheme is applicable for new build homes only, so if new builds appeal to you, then it might be worth reading up on the terms and conditions of the equity loan.
- The government will lend you up to 20% of the cost of your new build home
- You find the minimum 5% cash deposit upfront
- You therefore have an overall 25% deposit against the purchase price of the house/flat
- You won’t be charged loan fees on the 20% loan for the first five years
- In the 6th year you will currently be charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year in line with inflation. The annual increase in the fees is worked out by using the Retail Prices Index (RPI) plus 1%. For instance
-Years 1-5: no fees
-Year 6: 1.75% of the loan
-Year 7 onwards: 1.75% + RPI + 1%
-These fees do not go towards paying off the government loan
However the larger the deposit you put down, the more mortgage products you’ll have available and generally speaking, the bigger the deposit, the better the mortgage deal.
