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Help to Buy – A Handy Guide
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WELCOME
WELCOME Buying your first home is very exciting and there is nothing like the feeling of getting the keys and opening your own front door! Our aim at First Time Buyer magazine is to make the journey to homeownership a simple one, which is very easy to understand and navigate. We know how hard it can be to save for a deposit, but with Help to Buy it opens up the door to buying your dream home. We hope this little book – Help to Buy – A Handy Guide, will help you understand how it works, answer your questions and understand what this government scheme is all about. We are delighted that Barratt Homes, with its expert team, has sponsored this book. We wish you every success when buying your first dream home. Happy house hunting! Lynda Clark, Editor, First Time Buyer 5
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WELCOME
WELCOME FROM BARRATT HOMES As the UK’s largest housebuilder we are building new communities right across the country. Help to Buy is a great scheme which helps thousands of people afford their new home each year. Since it started in 2013 it has helped more than 200,000 people buy their new home, 80% of whom have been first time buyers. This guide will give you all the information you need on how to use the Help to Buy scheme, what to look out for and lots of hints and tips when buying your new home. For more information on Barratt Homes and to find out which developments have Help to Buy, visit barratthomes.co.uk or pop into one of our sales centres and speak to our experienced sales team. Steve Mariner, Sales Director, Barratt Homes
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HOW IT WORKS
OVERVIEW OF THE SCHEME Help to Buy: Equity Loan is a Government-backed scheme to help first time buyers and home movers by loaning them additional funds so they can buy a new home with just a 5% deposit. The scheme runs in its current form until the end of March 2021 (see page 19 for details of the replacement scheme).
meaning that with the minimum 5% deposit they would only need a 55% LTV mortgage. The Help to Buy: Equity Loan is secured on the home like a mortgage, but apart from a £1 a month administration charge there is nothing to pay until the end of five years. After five years, interest will be charged on the loan. When you sell the property, or pay back the Equity Loan, you must pay back the same percentage of the value of the house as you initially borrowed (not the monetary amount). The loan must be paid back within 25 years.
The scheme in England works by providing a loan of up to 20% of the property price, interestfree for five years. The buyer must provide a minimum of a 5% deposit, which means with a 20% loan from the Government they need only a 75% mortgage, which would have a lower interest rate and be easier to obtain than a high loan-to-value (LTV) mortgage.
Eligibility rules for Help to Buy: Equity Loan • The scheme is open to UK residents aged between 18 and 75 who are either first time buyers or are selling their home to move. There are no maximum income rules • You cannot use Help to Buy: Equity Loan if you have other
To reflect the higher property prices in the capital, buyers in any of the London boroughs can take out a maximum 40% loan through Help to Buy London, 8
HOW IT WORKS
Example house value: £160,000
£120,000 75% Mortgage
£32,000 20% Govt. equity loan £8,000 5% Buyer’s deposit • The home you are buying must be a brand new house or apartment from a developer who is part of the scheme • The property cannot cost more than £600,000. All houses must be freehold, but apartments can in some instances be leasehold. You can’t use a developer’s part exchange scheme
property, and you can’t use it for a buy-to-let property. You must be planning to live in the home, and permission to rent it out later is only given in exceptional circumstances • You must provide at least a 5% deposit and you must take a mortgage out for at least 25% of the value of the property (ie you cannot be a cash buyer) 9
HOW IT WORKS
12 STEPS TO BUYING A HOME WITH HELP TO BUY: EQUITY LOAN
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Check you are eligible – contact your local Help to Buy agent to be sure you meet all the criteria
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See an adviser – speak to an independent financial adviser or mortgage broker to check how much you are likely to be able to borrow, and get a mortgage offer in principle
your agreement to the Help to Buy funds being paid directly to the house-builder
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Reserve your home – the developer will want a nonrefundable reservation fee, which is why it’s worth checking your finances
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Find a property – look around to find your perfect new-build home; most major housebuilders are in the scheme, including Persimmon, Barratt Homes, Taylor Wimpey and Countryside
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Complete the paperwork – fill in a Help to Buy “Property Information Form” from the developer. This includes details of the home, deposit, mortgage and income. It also confirms 10
HOW IT WORKS
first. When you have signed the reservation form, the developer will post a copy of this and your Property Information Form to the Local Help to Buy Agent
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Get the go-ahead – the agent will check all your details and then issue an Authority to Proceed, which should only take four working days
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Exchange contracts – when permission is received you will need to pay a deposit and contracts will be exchanged. You are now legally contracted to buy the home
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Complete – on completion day your solicitor will ensure that the developer receives money from your mortgage lender and the Help to Buy: Equity Loan. Once everything has been paid you will be given the keys
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Appoint a solicitor – take the Authority to Proceed to a solicitor of your choice and instruct them to do your conveyancing
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Apply for your mortgage – you, or your financial adviser/broker, can now put in a full mortgage application
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Afterwards – after completion, your solicitor will send proof of the sale to the Local Help to Buy Agent who then registers your details with Homes England’s Mortgage Administrator. A second charge is registered on your home entitling Homes England to a share of the future sale proceeds equivalent to the percentage contribution made towards the purchase. You can now forget about your Help to Buy: Equity Loan for the next five years!
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Your solicitor is at work – all the legal work regarding the conveyancing and finances will be going on, and your solicitor will talk you through it. When all is in order, your solicitor will request permission from the Local Help to Buy Agent to exchange contracts 11
COMMENT
FIRST TIME BUYERS THINK BIGGER Sales director for Barratt Southern Counties, Lynnette St-Quintin, offers insight into first time buyer purchasing and explains how the Help to Buy scheme can assist buyers to think bigger when it comes to their first property Getting on the property ladder is one of life’s major milestones and every day we see the joy that buying a first home brings to so many. For me personally, in my role as a sales director, it always gives me great pleasure to see the excitement that owning a brand-new home for the first time can bring. We see an incredibly broad spectrum of first time buyers at our new developments, and it’s always interesting to see the different paths that people have taken to arrive at this point in their lives. Some buyers have obviously spent many years making sacrifices to save towards a deposit, including moving back in with their parents. They usually know exactly what they are looking
for and understand the process inside out. Others are less well informed – perhaps because they haven’t 12
COMMENT
deposit on their home, while the Government will lend them 20% (or 40% in London) interest-free for five years. In effect, this gives them the equivalent of a 25% deposit, enabling them to take out a smaller loan to value mortgage with a lower interest rate, while being able to buy a more spacious property that they won’t outgrow in a couple of years.
been saving up for very long, or they have suddenly been lucky enough to get a gift from the bank of mum and dad that makes it possible for them to consider buying for the first time. In these cases our helpful sales teams are able to guide them step-by-step through the experience. In addition, we are seeing increasing numbers of older first time buyers, including those with families, coming to us. They are not in the market for a starter apartment – they are quite rightly demanding more from their first purchase and are looking for a house with garden, a nursery, and plenty of room for the family to grow.
Often these buyers are delighted to find that the mortgage payments equate to around the same, or in some cases less, than they were paying in rent for a much smaller property, and the fact that as Help to Buy has no interest payable on it for five years, it gives them some breathing space.
It is exactly this type of buyer who has really been able to benefit from the Help to Buy scheme, as it gives them the opportunity to get more property for their money and set themselves up for the future. By using Help to Buy, they only have to find a 5%
One of the most rewarding things about my job is to see these buyers have the sudden realisation that they now own their own home and are able to invest in their own future, and perhaps that of their family. It must be a really great feeling! 13
HOW IT WORKS
WITHIN FIVE YEARS What if I want to move? There is nothing to stop you moving home, although the Help to Buy: Equity Loan will have to be repaid when you do (you can’t take it with you). As the loan is based on a percentage of the value of the property, when you come to sell, your home must be independently valued and sold on the open market at that value (Homes England will not agree to release its charge over the property for sales at less than market value). The amount you need to pay back will be based on the higher figure of either that valuation or the amount it actually sells for. If property values have dropped and it is worth less than when you bought it, you will pay back less than the cash value you were loaned, but if it is worth more, then you will repay more. You will bear all the costs involved in the sale,
plus a £200 fee for discharging the Equity Loan. Can I remortgage? You are allowed to remortgage while you have a Help to Buy: Equity Loan, although you will have to pay a fee of £115 if you want to change your lender or borrow additional funds. If you are coming to the end of a fixed rate term you may be able to switch to a different product with your existing lender to avoid going on to a costly
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HOW IT WORKS
standard variable rate (this doesn’t count as a remortgage). Otherwise you will have a fairly limited pool of lenders willing to take on a Help to Buy remortgage, so you may find it beneficial to see a mortgage broker. Can I pay the loan off early? You can pay off all or part of the loan at any time. In both cases it will require a valuation of the property and a £200 fee. If you are paying part of the loan (“staircasing”), you must pay at least 10% of the market value of the home at a time. You could also remortgage to pay off the loan if you wish to, although
most people wait until the end of the interest-free period. Can I extend my home? No – permission must be sought for any significant alterations, and this would not normally be granted unless it was to cater for the needs of a person with a disability.
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CASE STUDY
NICK WILLOUGHBY HAMPSHIRE
apartment off-plan was a great opportunity to have a blank canvas that I could make my own, while being surrounded by some elegant historical features.
Nick Willoughby, 38, was drawn to the history and restored period features of the White Building in Basingstoke, Hampshire, and decided to purchase a one bedroom first floor apartment off plan using Help to Buy.
“I felt stuck in the rental trap as it was hard to save while spending so much each month on rent. In the end, though, it was much easier than I expected as I only had to save up a 5% deposit, which was boosted a bit more by a special offer from Barratt.”
“I grew up in Basingstoke and wanted to stay in the town, and found that I was initially drawn to the history of the development. Buying my 16
CASE STUDY
ISABELLA & CHARLIE HARLOW Isabella Pyne, 24, and Charlie Courtenay, 26, moved into their first home at Barratt Homes’ Gilden Park development. The couple, who are originally from Harlow, were delighted to find their dream home just a stone’s throw away from where they both grew up. Isabella said, “We had been looking at properties for over two years and just hadn’t found a house that ticked all of the boxes. When we saw the Barwick we fell in love, it was everything we had been looking for and we knew it was the house for us. “We love the location of Gilden Park; we’re quite adventurous and being able to get outdoors at the weekends and go for bike rides or a nice long walk without having to travel for hours in the car is really important to us.” 17
HOW IT WORKS
AFTER FIVE YEARS All loans must be paid back within the same timescale as the main mortgage, but the interest structure of Help to Buy: Equity Loan is intended to encourage people to pay it off or staircase sooner, as it increases every
year after the initial interestfree period. In year six you pay 1.75% of the amount of the loan, rising each year by the increase (if any) in the Retail Prices Index (RPI) plus 1%. So, for example, if you bought a £200,000 home with a 20% equity loan, Homes England predicts that your mortgage would go up by £59 a month in year six and by £75 in year 10. If you went for the maximum 40% equity loan on a property costing the maximum £600,000 in London you could find yourself paying an additional £350 a month in year six and £442 in year 10 (all of
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HOW IT WORKS
over the five-year period, you might be pay off all or part of the equity loan via a new, larger mortgage.
which is only paying the interest, not reducing the capital owed). When the time to start paying interest approaches, you might want to look at remortgaging. If your home has increased in value and/or your personal circumstances have improved
Changes to the scheme Up until January 2020 there were seven different Help to Buy agents across England, but that has now been reduced to just three housing associations – Plus Dane Housing, BPHA and Radian which will act as agents in the North, Midlands and London, and the South respectively. In a measure to simplify access to information, these associations will also be responsible for promoting shared ownership and affordable rent schemes, as well as Help to Buy: Equity Loan. There will be an entirely new Help to Buy scheme launched in April 2021, which will be available to first time buyers only and is set to run for just two years. Under the new scheme, while the loan will still be up to 40% in London and up to 20% in the rest of England, the homes that can be purchased will be subject to regional price caps which will be set at 1.5 times the average forecast regional first time buyer price. These caps will range from £186,100 in the North East and £255,600 in the West Midlands to £437,600 in the South East and £600,000 in London.
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FINANCE
HELP TO BUY CALCULATOR With Help to Buy, you could buy a brand-new home sooner than you think. • You only need a 5% deposit • The Government lends you up to 20% of the value of the property • The loan is interest-free for 5 years, making your new home more affordable • You then need to secure a 75% mortgage
tool you can learn how you can afford your first home with just a 5% deposit, equity loan from the Government, and up to 75% mortgage. By using the calculator, you can calculate how much Help to Buy equity loan you need, how much mortgage, and then what your monthly mortgage cost could be. In order to calculate this, you simply input your income, the mortgage term, interest rate and cost of the property.
Using our Help to Buy calculator you can see how the scheme works for you and help you to start searching for a home within your budget. With this
www.barratthomes.co.uk/ HelptoBuyCalculator
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FINANCE
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LENDER
FIRST TIME BUYERS ARE NOT JUST A COG IN THE WHEEL First time buyers are a fundamental part of the housing market yet rising house prices and stricter affordability rules have made it increasingly difficult for them to get on the property ladder. Many don’t know where to turn if they’re rejected by the high street but there are other options and specialist lenders like us can help. We look at each case individually and look for ways to say yes to people who have often found that high street lenders are not set up to meet their needs.
Considering up to 90% LTV on New Build houses and flats, we aim to turn around deals quickly with an average application to offer time of just 11 working days. And our dedicated New Build underwriting team can provide an initial offer validity of 6 month, with a possible additional extension of 6 months!
Our range of mortgages are specially created for all types of first-time buyers, like the selfemployed, young professionals or national heroes like policemen, firemen and nurses. And, by taking account of their individual circumstances, we can also consider first time buyers if they only have a 5% deposit, a year’s history as a self-employed contractor or have less than perfect credit.
To find out how Kensington can help your clients, call 0800 111 020 or visit www.kensingtonmortgages. co.uk/intermediaries. You can follow KensingtonMortgages on LinkedIn. 23
CASE STUDY
THE ELDERS KENT
Lydia Elder, 29, and her husband Pete, 28 made the move from their two bedroom flat in Stratford, East London, to a four bedroom house at David Wilson Homes’ Castle Hill development in Ebbsfleet, Kent. Following the arrival of their two children, Teddy, 3, and Arlo, 1, Lydia and Pete knew that they needed to upsize and looked into using Help to Buy as a way to secure a larger property.
Lydia, comments, “Pete and I had a really positive experience with shared ownership and were able to staircase our way to owning the flat entirely, so when we discovered Help to Buy we had confidence in the scheme. Our mortgage repayments are virtually the same as what we were paying for our flat in Stratford, so we are financially no worse off yet have the added bonus of having a much larger property.” 25
BUYING NEW
WHY BUY A NEW HOME? From putting your stamp on a blank canvas to saving money on your energy bills, here are our top three reasons for buying a new build property over an older one
1 It is cost effective A key benefit of a new house is that by using more energy efficient building materials you can save hundreds of pounds a year on your energy bills. And your home will be warmer too, without the drafts and chills you sometimes find in older properties.
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BUYING NEW
2 Chain free With one in three purchase chains in the UK falling apart, buying an older property can often be a challenging experience. But with a new build, you are not at the mercy of the people you’re buying from, helping keep your move stress free.
3 No need for renovation When you buy a new build home, there’s no need for DIY – your home will be ready to settle into from day one, with a blank canvas on which to make your mark. What’s more, everything inside is new – from the oven to the shower – and is fully protected under warranty.
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BEING A 5 STAR HOUSEBUILDER Barratt is the only major national housebuilder to have been rated as 5 star for 11 years in a row by its customers. Each year the HBF New Homes Survey asks all customers who have bought a new home whether they would recommend it to a friend. For Barratt to be awarded 5 stars means that more than 90% of its customers are happy to recommend their home. Over the past 11 years that Barratt has been a 5 star housebuilder, more than 70,000 customers have said they are happy to recommend their homes to a friend. This high level of satisfaction comes from the focus Barratt has on quality, design and looking after its customers, particularly post sale. The HBF New Homes Survey is one of the largest surveys of its type in the country, with 50,000 new owners completing it each year. The simple star rating was developed to make it easy for people to understand which housebuilders have the most satisfied customers. To be rated as 5 star shows how much Barratt cares about its customers, making sure that the homes it builds, and the whole customer buying experience, are as good as possible. 29
TIPS
A SALES ADVISER’S TIPS WHEN MOVING WITH PETS Moving to a new home can be a stressful experience for animals, but David Wilson Homes sales adviser Natasha Seaborn-Davies gives an insight into how you can settle your pets into a new property with minimum distress Provide a comfortable journey to a new home When transporting a pet to a new home Natasha advises homebuyers to make the journey as familiar as possible and to allow pets to steadily enter their new environment. She says, “Buyers should travel with pets in their usual way and plan ahead by using travel crates which can be moved easily from the vehicle to the house. When at the new home, those with more nervous pets should open the door to the crate and let the animal come out 30
in their own time when they are feeling more confident, allowing them to explore their new environment at their own pace.” Settling pets into their new surroundings Make the new environment both relaxed and fun in order to make pets feel more comfortable.
TIPS
Hearing familiar sounds will make the transition to a new place easier.
Natasha said, “Make sure their toys are already there and give them one of their favourite treats to make a positive impression when a pet first enters their new home.
“It is not always a good idea to place a pet’s bed near to the front door as they may feel like they have to be constantly guarding the new house while in their bed and will struggle to relax.”
“Take 15 minutes away from unpacking to play with their favourite toy in the home or garden will use positive confirmation to make them feel more at ease.
Remembering the administrative jobs It’s easy to forget about the lesser known necessities which need to be completed when moving house.
“Animals pick up on human behaviour, so staying relaxed and using a positive tone will help them to feel more comfortable.”
Natasha adds, “Homebuyers must remember to update pets’ ID tags, microchip information, veterinary registration and insurance cover, making sure their new address is added to each of these things.
Choosing the right place for your pet to sleep Placing a pet’s bed in the right place can be vital for them feeling assured in a new environment.
“These tasks can often slip the mind but are a very important part of making a move with a pet.”
Natasha continues, “If possible, try to pick a spot that is similar to the one in your last home.
For more information about moving with pets, please visit dwh.co.uk/ library/Moving-Home-with-Pets 31
MAP
HELP TO BUY AGENTS HELP TO BUY - SOUTH
HELP TO BUY - NORTH
Radian Tel: 0800 456 1188 helptobuyagent3.org.uk
PlusDane Tel: 0300 790 0570 helptobuyagent1.org.uk
Bedfordshire, Berkshire, Bristol, Buckinghamshire, Cambridgeshire, Cornwall, Devon, Dorset, East Sussex, Essex, Gloucestershire, Hampshire, Hertfordshire, Isle of Wight, Kent, Norfolk, Oxfordshire, Somerset, Suffolk, Surrey, West Sussex, Wiltshire
Cheshire, Cumbria, Durham, East Riding of Yorkshire, Greater Manchester, Lancashire, Merseyside, North Yorkshire, Northumberland, Tyne and Wear, South Yorkshire, West Yorkshire
HELP TO BUY MIDLANDS AND LONDON
bpha Tel: 03333 214 044 helptobuyagent2.org.uk Derbyshire, Herefordshire, Leicestershire, Lincolnshire, London, Northamptonshire, Nottinghamshire, Rutland, Shropshire, Staffordshire, Warwickshire, West Midlands, Worcestershire
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CASE STUDY
KATY ALLEN PRESTON Katy Allen, 28, from Lytham St Annes was living with her parents when she decided to take the opportunity to buy her first property on her own, using the governmentbacked Help to Buy scheme. She’s now living in a Queensville style home at the development in Preston with her puppy Rolo. Katy said, “A mixture of aggressive saving while living at home and the Help to Buy scheme helped me get on the property ladder. I knew I wanted to move quickly and wanted something low maintenance with less DIY to do and a new-build seemed perfect.
the Queensville, the kitchen is ideal for me as it’s open plan but still separated from the main family room. The location of Wesley Chase was ideal, as it’s really easy to commute to Preston where I work, but really close to the motorway and easy to get to my parents’ house”.
“It’s also a nice feeling knowing that you are the first person to be living in your home, and that everything is nice, new and pristine... I loved the layout of 33
GLOSSARY
JARGON BUSTER Off-plan – Buying “off-plan” means a home hasn’t been built yet with househunters instead looking at plans of how it could look Snagging – This refers to small items of work that still need to be finished in a new home Completion – A property sale has been completed and the buyer finally gets the keys Conveyancer – A person who carries out the legal process to buy the property Deed of trust – Legally-binding document which sets out the financial agreement between joint property owners Exchange – Formally known as “exchange of contracts” Stamp Duty – Stamp Duty Land Tax (SDLT) as it’s formally known is a tax on residential property purchases over £125,000 in England and Northern Ireland
Buying your first home is a big decision and can often be overwhelming. But having an understanding of the different terms and phrases used in the buying process can give you the confidence you need to sit back and enjoy the whole home buying journey. Credit check – A lender checks your financial history Decision in Principle (DIP) – A lender’s estimate of the amount you’re likely to be able to borrow Interest-only mortgage – Where you pay only the loan interest off each month and the balance at the end of the mortgage term Mortgage valuation survey – A lender carries out a survey to check that the property is worth what you’re paying before they lend you the money Estate management charges – A yearly charge on the open spaces at a development, used to fund the upkeep of public areas 34
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