With Help to Buy, the buyer (‘you’) buys a new home on a new build development with assistance from the Homes and Communities Agency (‘the Agency’) in the form of an equity loan.
For London Help to Buy 40% equity loan assistance, your first mortgage must be at least 25% of the value of the property you wish to purchase. The mortgage, together with the cash contribution from you, must be a minimum of 60% of the purchase price. The maximum full purchase price is £600,000. Your cash deposit contribution must always be a minimum of 5% of the full purchase price.
The Agency will provide an equity loan to fund the balance needed to make up the full purchase price of your home (40% maximum for London Help to Buy) of the full purchase price. The equity loan must be repaid after 25 years, or earlier if you sell your home. You must repay the same percentage of the proceeds of the sale to the Agency as the initial equity loan (i.e. if you received an equity loan for 40% of the purchase price of your home, you must repay 40% of the proceeds of the future sale). An initial monthly management fee of £1 is payable by direct debit from the start of the Agency loan until it is repaid.
After the first five years you will pay an additional fee as interest of 1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%.