The main points of note about the London Help to Buy scheme are:
- Maximum purchase price capped at £600,000.
- Minimum cash deposit of 5%.
- Maximum Help to Buy loan is £240,000 (subject to a cap of 40%).
- The mortgage must be at least 25% of the purchase price.
- After 5 years the equity loan will attract interest of 1.75% variable, on an annual basis.
- The property to be purchased must be the applicants main residence. Second homes and buy to let purchases are in breach of the rules.
The other criteria to be wary of is that the Help to Buy agency apply their own financial assessment to all applications. In most cases their affordability calculations are more severe than the mortgage lenders. One such rule is that the maximum income multiple is capped at 4.5 times household income. So even if the mortgage lender approved a higher loan amount, the Help to Buy agency would reject the application. Fee wise, the usual mortgage lender fees will apply (application, valuation etc) and stamp duty will be charged in the normal way.
At Capricorn we have access to the same affordability calculator which Help to Buy London use, so we can ensure that all potential clients meet both sets of affordability requirements. Given the various rules and hoops that people will need to jump through, there will be a lot of wasted energy and abortive purchases unless the purchasers seek independent mortgage advice from the start of the process.
Your home may be repossessed if you do not keep up repayments on your mortgage.