You’ve almost certainly heard of the government’s various help-to-buy schemes, but you might have thought they were only for first-time buyers and so if you already own a home, you wouldn’t be eligible for any.
The good news is that you’d be wrong about the schemes only being there for first-timers. There’s also help available for homeowners who want to take the next step up the property ladder. The Equity Loan scheme is open to first-timers and existing homeowners who want to buy a new-build home.
The scheme, which will run until 2023, is available to buyers in England only, with Scotland, Wales and Northern Ireland having their own versions which, while broadly similar, have some differences.
The eligibility criteria for the Equity Loan scheme
In order to qualify for the scheme, the property you hope to buy must fulfil a few criteria. The property must:
• be a new-build;
• have a purchase price of no more than £600,000;
• be the only home that you own, and
• not be rented out or sub-let after you’ve bought it.
From 2021 there’ll be regional caps on the maximum purchase values, so visit helptobuy.gov.uk before you get the ball rolling to make sure you’re not affected by any of the changes.
How does the Equity Loan scheme work?
One of the biggest hurdles first-timers and second-steppers face is raising a big enough deposit to put down on the property they want to buy. Usually lenders want to see a 20% deposit, but with an average price of £275,000 for a two-bedroomed house in Cheltenham, this is no mean feat.
The Equity Loan scheme requires you to have at least a 5% deposit ready so that the government can lend you up to 20% of the property’s value (or up to 40% if you’re planning to buy within the Greater London area).
This means that you can get onto the ladder (or the next step) sooner and that you only need to apply for a 75% mortgage at most. The Equity Loan is interest-free for the first five years, after which interest is applied at just 1.75%.
