Help To Buy – dispelling myths and misunderstandings

The Government’s Help to Buy scheme has been supporting thousands of new home owners since 2013. Although seven years on, a vast range of myths and misconceptions are still circulating about what Help to Buy entails. 

With changes to Help to Buy approaching next year, we spoke to Scott Howitt, Sales Director at Chartwell Mortgage Services to find out what the real truth is about Help To Buy with the aim of clearing up some of the most commonly asked questions.

Why do people say Help To Buy is coming to an end? Won’t the scheme be here until 2023? 

While it’s true that a newer form of Help to Buy will exist in 2023, the evolved scheme will be different and will no longer serve all of the house hunters that it does currently. From April 2021, Help To Buy will be exclusively for first-time buyers. 

Help To Buy being for first-time buyers is currently a misconception in itself as most people believe you can’t use the existing scheme if you’ve owned a property previously – wrong! If you have already owned a property then you can still use Help to Buy this year before the changes kick in. 

The second major change is the value of property you can use the scheme for. Specific regional caps will come into force so buyers will need to check on the limits in their area – once the changes come into effect, the new regional cap will be set at just under £225,000 in the North West, for example.  

Do I earn too much to be considered? 

No. There are currently no salary caps, or limits on what you are allowed to earn while using the scheme. 

Is it possible to use Help To Buy when buying alone? 

Absolutely. While we do see a lot of young couples and families use the scheme, we also see plenty of people using Help to Buy to make a step onto the property ladder by themselves. Whether it’s your first property after leaving home, or something you’ve set out to achieve later on in life, you can absolutely use this scheme to purchase your own home.  

Will I be allowed to sell the home I bought through Help To Buy? 

The simple answer is yes, you absolutely can. There does seem to be confusion in this area but if you decide you want to sell your home, you can do so at any time. 

You must first enlist an independent valuer to decide what it is worth. Then, unless you have already paid back your loan, you will repay the Help to Buy equity loan during the sale transaction. So, if you initially purchased with a 75% mortgage and a 5% cash deposit (and have made no other staircasing repayments) you will repay Homes England 20% of the value at the time you sell. This payment will all be handled through the Mortgage Administrator. 

Will I be lumped with a huge debt after 5 years?

A Help To Buy loan is always based on what the mortgage advisor calculates you will be able to pay in five years’ time. Your financial assessment won’t exclude the loan repayments that will come into play after the first five years, so you really should feel confident in your ability to pay back the loan. 

If you have not repaid in full your Help to Buy equity loan after five years, you will need to review your Help to Buy Shared Equity loan to see how much you still owe. For example, if you borrowed 20% initially then you will still owe 20% of whatever the property is now worth. There are then a number of options you can choose from to repay the loan including; Repay the Equity Loan off from your own funds bit by bit; Remortgage the property to raise capital to pay off the Shared Equity Loan, or; Sell the property to redeem the Shared Equity Loan.