Help To Buy Scheme Wales
Help to Buy is a scheme that allows eligible purchasers to buy new build homes with assistance from the Welsh Government. There are two options available, which are Mortgage Guarantee or Equity Loan which means you can potentially move home with a deposit as little as 5%. It is worth noting that if you use this scheme to purchase a home, you are not able to sub-let. Please see our information on Buy-To-Let property if you wish to become a landlord.
These are available to both first time buyers and home movers wishing to purchase any new build homes worth up to £300,000. Buyers will need to contribute a deposit equal to 5% of the property price and in turn the Welsh Government will fund a shared equity loan for up to 20% of the purchase price. Buyers will then need to secure a mortgage for the remaining balance.
For a property worth £200,000
Shared equity loan:
Should you wish to then sell the property, and you sell it for £210,000, (so a £10,000 increase) you would get £168,000 (80%, based on the mortgage and the cash deposit) and pay back £42,000 on the shared equity loan (20%). You will then pay off the mortgage using the proceeds of the sale and will then repay the Help to Buy, shared equity loan.
- The shared equity loan comes with a small administration charge of £1 per month.
- In year 6 the interest is charged at 1.75% per annum of the original shared equity loan amount.
- After year 6 the interest will increase every year, this is worked out by using the Retail Prices Index plus 1%.
- These fees do not count towards paying back the equity loan.
This is phase two of the help to buy scheme whereby there is more mortgage availability for people with a 5% deposit. The difference between mortgage guarantee and shared equity loans is that with mortgage guarantee it is available for pre-owned properties as well as new builds.
Potential purchasers will still be able to prove that they can afford mortgage payments and meet mortgage providers lending criteria. If these conditions can be met and you have at least a 5% deposit saved, then it may find it easier to obtain a mortgage from a lender participating in the Help To Buy scheme. As with most property investments there are risks, one of the biggest risks being the possibility that interest rates could increase. We are currently at an all time low with interest rates meaning that these are going to bounce back, just make sure that you are in a position to still pay off the mortgage if they hit 5%.
Other Help to Buy schemes
- Help people that would be intended for social housing
- Equity loan, which is usually 30% of the asking price
- Loan must be repaid when property is sold
Homes Within Reach Scheme
- You purchase a percentage of the full open market value of the property.
- The housing association will provide an equity loan for the remaining percentage retained as a Charge on the property
- Unlike your mortgage, there are no repayments due to the housing association.
- The loan may be paid back voluntarily or upon a future sale.
- Intermediate rents
- Gives tenants an opportunity to buy the property outright
- You buy a share of your home (25% to 75% of the home’s value)
- Then pay rent on the remaining share.
- You’ll need to take out a mortgage to pay for your share of the home’s purchase price
- Shared ownership properties are always leasehold.
If you are looking to buy a property, don’t hesitate to contact Keylet Sales and Lettings, where we have a wide range of properties available for sale.
We have already handled sales processes in line with the Help to Buy Schemes.