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Help to Buy: FAQ
How does it work?
At least 5% of the property must be paid for with the buyer’s deposit. The next 20% is paid for with a government loan which in this example would be £40,000. The remaining 75% is paid for with a mortgage from any lender participating in the scheme.

The government loan portion of your agreement is subject to different rules than the mortgage portion. The mortgage portion remains subject to the lender’s usual criteria. When you come to repay the equity loan remember the amount will be calculated as a proportion of the value of the home at that time. This means the amount could be higher OR lower than the original loan you secured through Help to Buy. Equity loan cannot be used to purchase a buy-to-let investment, in any shared equity schemes, a second home or for a property worth more than £600,000.

What's best for me, equity loan or the mortgage guarantee scheme?
One of your first considerations when looking at Help to Buy may be deciding whether you're better off with Help to Buy: Equity Loan or Help to Buy: Mortgage Guarantee. In order to help you decide, here's a reminder of what both initiatives offer as well as the differences between them.

Help to Buy: Equity Loan

When you put down 5% of the property price on a new-build home, the government adds 20% in order to make up a 25% total deposit. This then gives a 75% mortgage to find from a commercial lender.

The 20% equity loan is interest-free for the first five years after which it is payable at 1.75% of the loans value per annum multiplied by the current Retail Price Index plus 1%. If you decide to sell the property before the loan is paid back then the government receives 20% of the sale price and you receive 80%.

Points to consider

* Equity loan is only available on new-build homes

* There are some differences between the Help to Buy schemes available in England, Scotland, Wales, Northern Ireland and London.

Help to Buy: Mortgage Guarantee

The buyer puts down 5% as a deposit, 15% of the remaining 95% mortgage is then underwritten by the government in the event of the buyer defaulting on payments. By having the mortgage partly guaranteed by the government, it's hoped that lenders will offer lower interest rates although this is not guaranteed.

Points to consider

* The mortgage you take out has to be a repayment mortgage, not a guarantor, offset or interest only mortgage.

* The property value you apply for cannot be more than 4.5 times your income.

* The last date you can complete a sale using Mortgage Guarantee is 31 December 2016 after which the scheme is closed.

What's common to both schemes

The property you buy must not cost more than £600,000 (although regional variations apply)

They're available to both first-time buyers and existing homeowners wanting to move

You cannot own another property anywhere in the world whe

Can I buy a home off-plan?
Yes, one of the many benefits of buying a new house is you can purchase it even before it's been completed. The advantages of this are many including getting the builders to add fixtures and fittings you choose as part of the build.

When a new home development is being built, the housebuilder ideally wants as many homes sold as quickly as possible. The result of this is an early potential buyer being offered financial incentives such as having legal fees or stamp duty paid, or some ‘extras’ provided for free.

Of course, when buying off-plan, it's important not to rush into any decision no matter what financial incentive you're given. You should have as clear a picture as possible of the new house you're moving into. The main way you'll achieve this is by viewing the show home. Yet, you'll also be shown floor plans, online properties that are similar or computer generated designs. You can ask for any documentation or resource from the developer that you feel would give you a better idea of the home you're thinking of buying.

Just as with any other house purchase, do as much research as you can about the area, double check any information you're given and don't rely entirely on the promises given by the developer. It may seem strange at first buying a home that hasn't been built yet, but it can also be very exciting as well as you see your new home being constructed right before your eyes. Buying a home off-plan can also have extra advantages such as it usually being worth more when it's completed than the price you paid for it at the beginning of construction.

If and when you do decide to buy off-plan, you should know already when the estimated completion date is. Builders have to work to strict guidelines so if they're late in due dates they can pay financial penalties. Once you feel completely satisfied the property is the one you want to purchase then you can reserve it. It may be a plot you reserve and again within a development the sooner you can reserve a plot, the better. After you have reserved your new home, you can pay a deposit at a later date.

If you already know you qualify for Help to Buy, you can go to your local Help to Buy agent and inform them of your plans. You also need to find a lender to provide the remaining mortgage, for instance, 75%, for equity loan. You also need a solicitor to deal with all the contract paperwork.

As the completion date of your new home becomes nearer, so you can check the progress of the house build and deal with the final paperwork. You should have a snagging survey carried out and once you're satisfied everything is correct, it's simply a case of moving into your new home.

Do I have to pay stamp duty?
The Stamp Duty Land Tax (SDLT), commonly referred to as simply stamp duty, is applicable on all Help to Buy properties. This means for Help to Buy: Equity Loan the SDLT is applicable on the full 100% property purchase price, even it's split up into the 5% deposit, 20% equity loan and 75% mortgage.

For Shared Ownership, there are two ways to pay SDLT. You can either make a one-off payment up front (known as making a market value election) which is based on the full market price of the property. Otherwise, you can pay the stamp duty in stages. If you choose this way you pay SDLT on the first sale amount. Yet, you don't have to pay stamp duty when you're staircasing until you own 80% of the property. You also don't have to pay SDLT when the home is sold. For more details on how SDLT is applied you can go to the government's SDLT Shared Ownership page.

The current rates for SDLT are as follows:

Band SDLT for one home
£0 – £125k 0%
£125k - £250k 2%
£250k - £925k 5%
£925k - £1.5m 10%
£1.5m + 12%

Are there any restrictions on the type of property I can purchase?
With Help to Buy Equity Loan, there are restrictions on the type of the property you can buy. In terms of price, the maximum value of the property is £600,000 in England. The equivalent scheme in Scotland has a sliding scale of maximum property prices year on year. In Wales, the maximum property price is £300,000. It must also be a new build home with the housebuilder having a registration agreement with the Homes and Communities Agency. There are no restrictions on the number of bedrooms the property has or the general type of property it is.

Using our comprehensive search facility on Whathouse.com you'll see immediately there are all kinds of new homes available to purchase through Help to Buy right across the country. When looking for a help to Buy property you'll always see the Help to Buy sign next to it which notifies you it is eligible for the scheme.

Can I rent out my Help to Buy home once its bought?
No, you cannot sublet your home once you buy it. The aim of Help to Buy is to assist buyers to get on the property ladder. It cannot to be used for buy to let. In addition your home must be your only residence and the place you intend to live in. Nevertheless, there could still be some exceptional circumstances where it would be possible to rent out your home.

For instance, if you were in the armed forces on a tour of duty away from home then it may be possible but even then you would need permission from your local housing association and mortgage lender. In general, you cannot rent out your home.

Can I change the property in any way?
You would need permission if you want to alter or extend the property in any way. Before you do start to make improvements you should try and repay all or at least part of the contribution given to you in order that you were able to buy the home in the first place. The reason being that this money will be used to help other buyers, like yourself, get on or move up the property ladder.

However, if requirements were needed in the case of disability or hardship of any kind, your Help to Buy agent would carefully consider any application. If improvements were made, it should be noted that they still wouldn't be considered when a future valuation is done to work out how much should be paid back to the Homes and Communities Agency.

Can I get help with benefits to pay the Help to Buy fees, if I lose my job?
You wouldn't be able to claim Housing Benefit for Help to Buy fees because they are not classified as rent. It's why, when you're first considering Help to Buy, you should think about all future scenarios including what would happen if you lost your job. Ask yourself how you would pay any fees. If possible, you should try and make sure that other income streams are in place to compensate for any job loss. However, you should be aware that you wouldn't get direct assistance with Help to Buy fees from receiving Housing Benefit.

However, you could get help with your mortgage interest payments. This benefit is called support for Mortgage Interest (SMI) and is usually paid to your lender. It's important to note you can't get help with your actual mortgage loan amount only the interest on it. In addition, it's not always guaranteed you'll receive SMI.

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