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Help for Homebuyers Webinar - Your questions answered

Industry experts from OnTheMarket, First Time Buyer Magazine, Torc24 and Barratt London gave a useful insight into the Help to Buy government scheme, as well as an insight into the current housing market, and the financial benefits of buying now for first-time buyers.

Your questions have been answered by our expert panel below. If you do have any more queries please do contact our Sales Advisers who will be happy to help.

Missed the webinar? You can watch it again here

Section 1 - Help to Buy

1. Can you buy out/pay out help to buy by refinancing your mortgage by year 5?

Yes, you can repay the government equity loan at any time, this may be possible by refinancing the property, but will depend on what the new value of it is and your own affordability.

2. What happens if you want to sell the property before the 5 years with Help to Buy?

You can sell the property at any time and the value will need to be professionally determined.

3. I have 10% deposit ready for a property and an excellent credit score and applying as an individual. Being a Tier 2 General visa holder in the country for past 1.5 years and with 1.5 years left in my Visa, am I eligible for Help to Buy Equity scheme in London? In addition, is that considered a Public fund?

You are eligible; it would however be down to lender credit score due to your current visa situation as to whether you could get a mortgage. Your excellent credit score will help greatly. Public funds I believe relates to benefits you receive. As Help to Buy is actually a loan, I believe it falls outside of that.

4. Are you allowed to rent a room to a lodger while living in your help to buy home?

You may be able to rent a room in the property but you must continue to live there.

5. If I have second home outside UK, am I eligible to buy house using Help to buy scheme?

No, if you own a property anywhere in the world you would not normally be eligible.

6. Is affordability assessed on HTB in the same way as Shared Ownership?

It is similar in the way it assesses the cost of the various components of buying, and limits borrowing to 4.5 times income, however there is no income cap on Help to Buy.

7. Can you use a Lifetime ISA and your partner's Help to Buy ISA in conjunction with this Help to buy scheme?

You can certainly buy with someone else who has a Lifetime ISA. I cannot find anything from the Government that says you cannot buy with someone that has a help to buy ISA. It does say however that the same person cannot use the bonuses from both a Lifetime and Help to buy ISA, but nothing about different people. You are limited though to a maximum purchase price of £450k in London.

8. Can you explain the rates paying back of the equity in the Help to Buy scheme after 5 years?

After 5 years so the beginning of year 6, an interest charge of 1.75% is made on the amount you originally borrowed from the Government. This is taken monthly by direct debit.

9. Are you still able to get a 5% deposit with HTB or do you need the 10/15/20% now required in the wider market. Do you expect the mortgage market will improve next year?

Yes, Help to Buy mortgages are still readily available with just a 5% deposit. Without this scheme or anything similar, most lenders currently require a 15% deposit. Yes, we do hope this will improve next year.

10. I will have a 10% deposit by April 21 - when should I start looking at reserving new builds.

If you have at least 5% now you could potentially buy now (using Help to Buy). By waiting until April 21, you will miss the Stamp duty holiday window that ends 31/3/21.

11. Can a person on Tier 2 work visa get the Help to Buy?

Yes, it is possible.

12. Is it the same process for self-employed as individuals? If not how would be the process?

The process is the same when applying for Help to Buy or any mortgage. The lender will look at your self-employed income depending how you operate. For Ltd companies they look at salary and dividends for the last 2-3 years typically and sole traders would be the last 2-3 years either audited accounts or preferably SA302’s/tax returns.

13. Is there an age restriction for Help to Buy?

The only limitations on age are really, around what lenders are comfortable to lend up to. We have a number of lenders that will potentially lend to age 75, with a number also offering mortgage terms up to 40 years.

14. For the Help to Buy scheme, is the house totally mine or would I have a share in the property?

With Help to Buy you own the property 100%, you do not share it with anyone. The main difference to a standard house purchase is that you owe money to two people – a mortgage lender and the Government rather than just a lender.

15. How easy is it to re-mortgage after 5 years (to raise more money in order to staircase)? Are the number of lenders/deals available more limited as you are still under ‘Help to Buy’?

There are many lenders able to look at assisting you to re-mortgage when your current deal ends, this may well be before even before the first 5 years have elapsed. Raising additional money to staircase with depend on the value of the property at that time and your affordability to borrow more money.

First time buyers
New homes

Section 2 - Financial

1. If your first time buy is a buy to let, do you still get the stamp duty holiday?

The Stamp duty holiday is available to everyone; however, there is a 3% extra charge for buying a second home or buy to let which is still payable even by first time buyers for buy to lets.

2. What will happen if the developer does not finish construction on time?

You are protected when you enter into contract with a developer as there is a longstop date noted in the contract. If the developer does not deliver the property by the longstop date, they are in breach of contract and you walk away without penalty.

3. Do first-time buyers need to pay stamp duty if the property cost is below 500k?

If a purchase is completed before 31/3/21 then everyone has no stamp duty cost, including first and subsequent buyers if it is below £500k. Investors and second homes do still have a 3% levy.

4. I am on Leave to Remain status and I have 8 months visa left. Next year in June I will renew my permit. Will I be eligible to take mortgage?

You may be eligible now, depending on how long you have already lived here. We would need to assess your current circumstances.

5. Can you please explain how the current NHS 5% offer works?

To show our gratitude all NHS workers will be offered a 5% contribution towards their deposit, up to £15,000. Here is an example of how it works: For a home costing £200,000 they would qualify for a contribution of £10,000. 

6. Can you explain the definition of a first time buyer in April 2021? Is it not just strict first time buyers at that time?

It is defined as somebody who has never owned a property anywhere.

7. Is there a penalty for paying off the equity loan in full before the 6 years?

No, the amount you repay though is determined by the value of the property when you decide to pay it off.

8. Do you have to live in the house until it has been paid off or can you move out after a while and rent it out?

No whilst you have an equity loan outstanding to the Government, you cannot normally let the property out. There are some exceptional circumstances they may consider, but you would need to contact the administrator of the scheme to discuss.

9. If you pay off the equity loan, are you allowed to let your property?

Once you have paid the government load you should be able to let the property out. If it still has a mortgage on it, you may need to seek that lenders permission.

10. How much on top if the deposit do you advise should be saved, i.e. for solicitors fees etc.?

On top of deposit and assuming there is no stamp duty cost, then we tend to recommend having around £2,000 for legal and purchasing costs.

11. I have a £24k deposit so far. I earn £36k a year. I have a low credit score, due to missing phone contract payments whilst at University few years back. What is the likelihood of me getting a mortgage?

Please contact us and we can look at it for you. Some lenders are lenient on small problems over 2-3 years ago.

12. Can we get a mortgage if I am unemployed and my husband is working only? We are as well, in receipt of Universal credit.

Potentially yes, both parties do not have to be working to get a mortgage, but the cost of any property you are looking to buy needs to be affordable using that one income, plus any usable benefits.

13. I have been with my employer for over 10 years. I am now working abroad. Do I qualify for the scheme and my savings etc. be valid?

As you need to reside in the property, you possibly will not qualify but if you do return, then I would not see a problem.

14. The Government equity loan, can it be paid over time gradually and how does the house valuation work if you pay back the equity loan in multiple instalments?

You cannot gradually pay the loan back, it must be done in minimum 10% chunks, each time you want to make a repayment, and the property must be valued. This value of the property is then used to work out what the 10% figure is this example would be.

15. Will you have to pay stamp duty as a first time buyer in 2021?

It will depend at what purchase price you purchase at. The £500k stamp duty holiday ends on 31/3/21. I assume it will revert to Stamp duty being payable above a £300k purchase price again.

16. Can you talk about energy efficiency? I have heard a lot new builds do not allow you to change every providers at all. Can you explain why this is?

An energy centre supplies most large-scale developments. An Energy Service Company (ESCO) will be appointed to manage the communal energy centre, distribution of heating and hot water services and the billing of residents for these services. The electrical supply to the dwellings is a traditional system and is independent of the central heating system. This means the resident is free to change the electricity supplier to their property.

17. How much does it cost an AIP (soft print) that does not affect or appears on your credit score records?

We (that is TORC24) can arrange an AIP free of charge.

18. Are developers taking advantage of the stamp duty holiday and increasing the property prices artificially?

Barratt London have not increased pricing since the stamp duty holiday was announced. The holiday was implemented to stimulate the housing market. We have seen an increase volume of enquiries as a result and have no stock left, which will be complete by the March 2021 cut off.

19. Please could you explain again the costs from the 40% equity loan from the government after the 5 years?

From year 6, every year will increase 1% plus 1.7%. Therefore, after year six interest is charged at 1.75%, this interest rate then increases very slightly in line with the retail price index plus 1% for the following scheme each year. At the time of writing I think RPI is 0.5% so using this example, the 1.75% rate would rise by 1.5% to be 1.776%

20. If you take out a mortgage and your salary goes up and down. What is the added effect of this?

Lenders can only assess your income at the time of application, as they would not know what fluctuations might occur. If there is varying income at time of application, then normally around 50% of this is used to account for the fluctuations.

21. How do 0-hour contracts work? Do I need to show a contract to get a mortgage?

It can be possible to get a mortgage with a zero hour’s contract. Lenders that will help usually want a minimum of 12 months continuous experience and employment on that contract. We would normally need to see the contract.

22. How much does it affect your ability to secure mortgage if you recently graduated and were employed?

Not at all, lenders will usually be happy to use the income you are now on as an employed person and will not disadvantage you because you have recently graduated.

23. Recent reports suggest that new builds in London may be approx. 10-15% more expensive than equivalent existing properties. Is this true? Does it mean that if someone needs to sell within a year could the value have fallen risking negative equity (especially with only 5% deposit...)?

Whilst as a Mortgage broker we do not get involved in the pricing of properties or have any expertise in future values, we do see that all lenders request an independent valuation on the property before lending and would not do so if they were not happy. Future market fluctuations are very difficult to account for and predict however.

24. I understand that HTB is only available to homes that are completing within 6 months. Does this mean that even when the government announces HTB during end of Oct, I will need to limit my options to Barratt properties that complete before April-May 2021?

You can apply for HTB funding from 9 months from completion. Therefore when the new scheme is launched (likely to be start of November) the completion would need to take place within 9 months of that date.

25. Does student finance loans also affect my application?

Student loans are taken in account as a deduction when looking at affordability, much like any current debt. They do not however look at the balance that you owe, just the monthly payment you make.

26. Is there a minimum time after purchase that must before you are allowed to start stair casing? I.e. no stair casing within 6 months or some similar rule?

No time limit, you can staircase at any time.

27. Do you accumulate interest on the first 5 years even though you do not pay during those first 5 years?

No, it is genuinely interest free for the first 5 years

28. Isn't it better to take out the max amount of the government equity loan, as the interest rate is better than a traditional mortgage?

It really depends on your affordability and what happens to house prices. Without getting into the realms of advice, if the home increases in value (which we all hope it does) then the bigger the share you took from the Government, the more you pay them back. If you took the full 40% loan then every £1, the property increases in value by, you give 40p to the government. Therefore, if you only borrowed a 20% share from the Government it would only be 20p you paid them.

29. If there are issues with the build, appliances, paintwork after the move in date what guarantees are there.

Your purchase is covered by a 2 years fixtures and fittings guarantee, and 10-year NHBC structural warranty. We have a dedicated customer care team that will take care of any issues covered by the guarantee.

30. I just want to ask if my payroll is issued by a company located in Birmingham. Could I apply a Help to But in London?

It does not matter where your payroll company is based. A lender would just normally want to see that you are going to live close enough to where you physically work. If you work from home then that would in theory be fine also.

31. What are the options available to pay the equity loan in full?

The two main options are having sufficient cash (inheritance/gift/savings etc.) to repay the equity loan or subject to sufficient income and just as importantly, depending on the value of the property, I may be possible to borrow additional money from your lender or a new one.

32. How much money would be need on top of the 5% deposit including legal fees, mortgage assessments etc.

Approx. around £2k is typical for legal and subsidiary costs, assuming there is no stamp duty.

33. How long does it take to get a mortgage approved for first time buyers through Torc24 and other affiliated mortgage companies?

Initial mortgage approval (an AIP) can be done the same day. Full Mortgage approval typically takes 14-28 days depending on lender workloads.

34. At which point on the contract should the Stamp Duty be paid?

Stamp duty is payable at completion of the property. So pretty much as you move in.

35. Is it possible to sell your property before you have paid off the equity loan to the government?

Yes, there is no restriction against you doing this. You must just follow the process to satisfy repaying the equity loan at the same time.

36. If I pay the government’s loan partially before the interest kicks in, in the year 6, will I be charged the interest only over the amount still left to pay?

No you would be charged interest based on the remaining percentage you owe (remembering minimum 10% repayment chunks or more)

37. Are there interest only mortgage for shared ownership in the market?

No all government-backed schemes must be taken out on a repayment basis.

Happy home owners
Happy home owners

Section 3 - Product

1. Some developers offer a 5% deposit contribution, does Barratt London do this?

We are currently offering a 5% deposit boost scheme on a number of developments on selected plots only. To take advantage of the scheme the customer needs to put in 10%, Barratt London contribute 5% and then you secure an 85% LTV mortgage.