If the home you’ve got your eye on happens to be a newly-built property worth up to £600,000, you could benefit from the government-backed Help to Buy: equity loan initiative. For you to be eligible for the scheme, you’ll need to have a deposit of at least 5% of the property price and not be planning to sub-let at any point. This must also be the only property you own.
How the Equity Loan Scheme Works
The equity loan scheme was developed by builders of residential homes in partnership with the UK government. When you can raise at least 5% of the deposit for your new home and pass the necessary affordability and credit checks for a mortgage, the government will supplement your deposit with a loan for an amount up to the additional 20%. This means you’ll be able to take out a mortgage for the remaining 75% of the cost.
Good News for Homebuyers with Small Deposits
Equity loans are especially good news if you want to get on or move up the property ladder but can only raise a small deposit. However, it’s important to realise that although the equity loan is fee-free for the first five years, fees do begin to accrue from the sixth year onwards, and you must pay them in addition to the original sum borrowed. Also, you’ll need to pay them back the equity loan when you sell your home or after 25 years, whichever happens first.
How to Apply for an Equity Loan
In order to buy a home with an equity loan, you’ll need to get it from an approved builder registered on the Help to Buy scheme. Once you’ve decided to go ahead, Zing can put you in contact with the Help to Buy agent in your area.
Our database contains thousands of mortgage deals, so we’ll have no trouble matching your requirements with the right product. And our friendly advisers will be there for you every step of the way, from discussing affordability to arranging income protection. We can also help if you’d like to discuss other affordable housing options.