You take out an affordable mortgage (minimum 80% of the purchase price) on which you make repayments in the normal way. The rest of the purchase price will be met by an equal equity loan from the HCA.
For the first 5 years you pay no interest on the equity loan from the HCA.
After 5 years you pay interest on the equity loan of 1.75% per annum - this fee increases each year by RPI plus 1%.
When you sell your Help to Buy home the equity loan is repaid from a share of the sale proceeds. So if your initial loan totalled 20% of the purchase price, your repayment will be 20% of the total sale value achieved.
After 12 months of ownership of your new home you can choose to make part or full repayment of the equity loan at the market value at that time. The minimum repayment is 10% of the total market value.
If the value of the property has increased by this time the buyer the HCA will all benefit from a share in this increase. If the value of the property has gone down, the HCA will only receive the sale proceeds that are left over once the mortgage has been repaid.
The HCA's entitlement to a share of the future sale proceeds is secured through a second charge on your home. This is done in the same way as your mortgage lender secures its lending.
Although you may pay as little as 80% of the value of your new home you will be the legal owner with 100% ownership.
Local HomeBuy Agents (a housing association appointed by the government) will assess and approve your eligibility for Help to Buy and you need to be confirmed as eligible before you proceed with the buying process. This scheme is only available to approved purchasers.
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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