Posted by Megan Thorne, Solicitor
How to successfully apply for the Help to Buy equity loan
Many people find themselves in a position where they are financially comfortable with mortgage repayments, yet cannot save up the necessary deposit to purchase a home. The Help to Buy equity loan scheme offers the opportunity for purchasers to borrow up to 20% of their property purchase price (40% in London).
Home buyers then have to pay the same percentage of the property value back to the Homes and Communities Agency at the time of repayment (either a voluntary repayment up to year 25 or compulsory repayment at the time of sale or remortgage).
This means that purchasers may pay back more than they borrow, or less, depending on the property market. The loan is interest-free for the first five years.
The government statistics show that from 1 April 2013 to 31 March 2017, Help to Buy was used to part-fund more than 120,864 purchases.
New figures reveal that mortgages for new homeowners, continue to rise significantly. For instance, mortgage completions for first time buyers increased by 8.1% compared with May last year.
Who is eligible for a Help to Buy equity loan?
The property has to be a new build property with a registered developer. However, you do not have to be a first time buyer.
You should speak to a financial adviser to ensure you meet the required criteria. You will not be able to use the Help to Buy scheme if the purchase price of the property is more than £600,000 or the property is not being used as your sole private residence.
If you are eligible for the loan then your lender will apply for the Authority to Proceed from Help to Buy when they submit your application.
How to start the legal process – The Authority to Proceed
Your solicitor will receive the Authority to Proceed, along with your Personal Worked Example, directly from Help to Buy if your application is successful. This offer is valid for up to 6 months.
Once the mortgage offer is received from your first lender (Help to Buy is a second charge) then your solicitor will report to you on both offers.
You may be required to provide your solicitor with a copy of your mortgage valuation if your lender sends this to you directly. You will also be required to sign the equity mortgage deed in the presence of a witness.
Your solicitor will be required to submit their Form One to Help to Buy which sets out details of your mortgage, Help to Buy details, any incentives from your developer and whether you have a property to sell. Your solicitor will also send a copy of your mortgage offer and mortgage valuation to Help to Buy with their Form One.
Help to Buy take 5 working days to process a Form One and will then issue your solicitor with an Authority to Exchange.
The Authority to Exchange is valid for 28 days from the date of your solicitors Form One. This gives your solicitor a window during which to exchange contracts. If this period expires then your solicitor will need to submit a new Form One. You will need to pay a 5% deposit to your solicitor before exchange of contracts.
The next steps – Confirmation of Exchange
Following the exchange, your solicitor will need to submit a Confirmation of Exchange Form to Help to Buy within 2 working days of exchange. Once a completion date is fixed then Form Two will be sent from your solicitor to Help to Buy. Within 3 working days of this submission, Help to Buy will issue the Confirmation to Developer. This confirms that the Help to Buy funds will be released to the developer.
Help to Buy require 12 working days to release the funds, although some developers are happy to complete in advance of them receiving the funds, subject to the Confirmation to Developer being received.
Following completion, your solicitor sends a copy of their application to the Land Registry to Help to Buy along with a copy of your signed mortgage deed.
This must be done within 5 working days of completion.
Registration of a new build property currently takes several months at the Land Registry.
Your solicitor applies to the Land Registry to register you as the new owner, as well as documenting your mortgage and Help to Buy equity loan. This ensures that the Help to Buy loan is registered as a second charge on your property to provide security for the loan.
The charge is registered in favour of the Homes and Communities Agency (rather than listed as Help to Buy). On receipt of the completed registration from the Land Registry, your solicitor will send a copy of the Land Registry title documentation to both you and Help to Buy.
Need more help?
Royds Withy King has a dedicated team who are able to support you with your purchase of a new build property using the Help to Buy scheme. Please contact us should you require any assistance.
For more information contact our team of specialist residential property solicitors.
0800 027 2276 Email us
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