Help to Buy For Contractors

Help to Buy For Contractors

Take a moment to reflect on the past, when the housing market was thriving and people fondly recall the simplicity of borrowing money and financing their property purchases. The restrictions on the number of mortgages one could have were nonexistent, and obtaining loans didn’t appear to be a problem, even for those with less-than-ideal credit scores. Now, when you think about the current state of the housing market, what comes to mind? Many would say they only see negativity and uncertainty. However, it’s not all doom and gloom, and the Help to Buy scheme serves as a great example of this.

Can Contractors Qualify for Help to Buy Mortgages?

A frequently asked question is, “Can I qualify for a Help to Buy Mortgage as a Contractor?” The straightforward answer is yes, but it’s advisable to seek assistance from a specialist broker like us to navigate the application process. Going it alone may not be the most optimal approach for you.

Help to Buy For Contractors

If you’re unfamiliar with the Help to Buy scheme, it was established by the UK Government in 2013 to assist first-time buyers in purchasing their first homes. Under this scheme, the government provides a loan of up to 20 percent of the cost of a newly built home. Consequently, you only need a 5 percent deposit and can secure a 75 percent mortgage, rather than a 95 percent one. Additionally, there are no fees on the government loan for the first five years.

What exactly is the Help to Buy Scheme?

Help to Buy Equity Loan (2021 – 2023) – England, there are separate schemes for Scotland, Wales, and Northern Ireland.

Help to Buy is a government initiative designed to aid first-time buyers in acquiring a property with just a 5 percent deposit. You can borrow 20 percent of the purchase price (40 percent in London) interest-free for a period of five years. This scheme is open to new applications from December 16, 2020, until March 31, 2023.

The previous scheme, known as the Help to Buy Equity Loan (2013 – 2021), closed for new applications on December 15, 2020. Purchases must be completed by March 31, 2021. The primary change is that it is now exclusively available to first-time buyers, excluding existing homeowners selling their property to move elsewhere, and regional price caps are in effect.

You can borrow a minimum of 5 percent and up to a maximum of 20 percent (40 percent in London) of the full purchase price of a new-build home, provided that the developer is registered with the Help to Buy agency to qualify for the Equity Loan.

There are regional price caps on property prices, as opposed to the previous uniform cap of £600,000 across England.

Calculating Help to Buy For Contractors

Let’s consider an example where the cost of the home is £100,000:

  • You will need to contribute a minimum deposit of 5%, which amounts to £5,000.
  • You may qualify for an equity loan of up to 20%, which would be £20,000.
  • The remaining 75% would be covered by a mortgage, amounting to £75,000.

In the case of properties in London, the equity loan can cover up to 40% instead of 20%. Using the same example, the mortgage amount would be £55,000 for the London area.

Repayment of the borrowed amount from the government is required within the mortgage term or upon selling the house. It is also possible to repay it earlier by remortgaging the property and releasing the built-up equity. However, it’s important to note that there is no guarantee of equity increase or affordability of the increased mortgage needed to repay the Help to Buy equity loan.

Eligibility for Help to Buy: Equity Loan (2021-2023)

Eligibility for Help to Buy: Equity Loan (2021-2023) includes:

  • Being over the age of 18.
  • Being a first-time buyer.
  • Purchasing a new build home within the applicable regional price cap.
  • Not owning any residential property now or in the past, either in the UK or abroad.
  • Not having had any form of sharia mortgage finance.
  • If married or in a civil partnership, a joint application with your spouse or partner is required.

An eligibility calculator tool will assess your monthly income, expenses, including household bills, and estimated mortgage repayments to determine if you qualify.

The repayment of the Help to Buy equity loan is based on a percentage of the property’s value. For instance, if you purchased a property for £100,000 with a 20% equity loan, amounting to £20,000, and later sold it for £200,000, you would need to repay 20% of the sale price, totaling £40,000. The government holds a stake in your property equivalent to the percentage of the equity loan. However, you have the flexibility to choose a lower percentage, such as 10%.

During the first five years, the equity loan is interest-free, and a monthly charge of £1 is required to maintain the account. After five years, an additional annual fee is charged, starting at 1.75% of the loan amount, and increasing annually based on the Retail Price Index (RPI) plus 1%. This fee can be paid through monthly or annual direct debits. Failure to comply with the loan terms may result in the full repayment of the loan.

Contact Contractor Mortgage Solutions

We are experienced in helping with help-to-buy mortgage applications and assisting with approval for the equity loan from the help-to-buy agents.

In London, the Help to Buy scheme offers further benefits for those purchasing a property. The equity loan limit was increased to 40% for new homebuyers in Greater London in 2016, and this extension continues under the Help to Buy Equity 2021-2023 scheme.

Contact us today to determine your eligibility for the Help to Buy scheme. Whether you’re ready to explore your options or have general inquiries about the process, feel free to reach out to us via email or phone. We offer a free, no-obligation telephone consultation. You have nothing to lose!

Contact Information:

For a comprehensive quote tailored to your contractor position and circumstances, get in touch or call us today to speak with one of our expert mortgage brokers at 0203 827 8560.