Help To Buy

London Help to Buy Terms and Conditions

The following terms and conditions apply

1.1 This offer is only available on selected new build plots and developments in the 32 London boroughs and the City of London only. The maximum property value for London Help to Buy is £600,000.

1.2 London Help to buy is only available on capital and interest (or repayment) mortgages and on properties which are occupied by the individual or individuals taking out the mortgage.

1.3 Purchasers will be required to raise funding, including a mortgage of at least 25% and a deposit of no less than 5% of the property purchase price (excluding any mortgage fees). The property will be subject to a first charge in favour of the mortgage company. Purchaser deposit must be a minimum of 5% after the equity loan has been applied. Mortgage lender's criteria may affect any deposit percentage and whether it applies before or after the equity loan is deducted from the purchase price.

1.4 The HCA will provide an equity loan to eligible purchasers of not more than 40% of the purchase price subject to the terms of the equity loan agreement. Based on the maximum purchase price of £600,000, the HCA will therefore provide an equity loan of up to £240,000.

1.5 The equity loan provided by the HCA will be secured by a second charge on the property behind the first charge referred to in paragraph 1.3.

1.6 The equity loan provided by the HCA will be interest free for the first 5 years. From the beginning of year 6, interest will be payable by the purchaser at an annual gross rate of 1.75%, rising at the Retail Prices Index published by the Office for National Statistics plus 1% per year thereafter.

1.7 The equity loan must be repaid within 25 years of legal completion of the purchase of the property whether the property is sold or not.

1.8 The equity loans will be repayable on the basis of the greater of the price of the property or its market value at the time of future sale or mortgage repayment as opposed to the original purchase price but disregarding additions or improvements made to the property by the purchaser with the consent of the HCA. This means that if the property increases or decreases in value, the purchaser will pay the HCA the same percentage of the new price of the property as the percentage the equity loan was of the original price. This may result in the HCA being paid more or less than the original loan value.

1.9 If, on the sale of the property, the price of the property has fallen and there is insufficient money from the sale to repay the equity loans after the mortgage has been paid the purchaser will lose any deposit paid. The HCA will not however seek to recover the balance of their equity, not otherwise paid out of the proceeds of sale, from the purchaser.

1.10 The purchaser may repay the equity loan to the HCA at any time following legal completion. Repayment whether in full or by instalments will be based on the market value of the property at the time of the repayment(s) and the purchaser will have to arrange and pay for the valuation of the property at that time. The minimum instalment value is 10% of the total of the equity loans.

1.11 Detailed terms and conditions apply to the equity loan which will be made available to the purchaser via their legal advisors as part of the conveyancing process.

An example of how London Help to Buy works is as follows:

  • - Purchase price £350,000
  • - Mortgage £192,500 (55%)
  • - Deposit £17,500 (5% of purchase price)
  • - Equity loan £140,000 (40%) provided by HCA
  • - For the first five years the equity loan is interest free. After five years an annual fee of 1.75% of the
       outstanding balance of the Equity loan is charged. This will be increased annually by RPI +1%
  • - Sale after five years
  • - Open market value £420,000 (a 20% uplift in value)
  • - First charge mortgage redemption payment (assuming no repayment of capital) £192,500
  • - Equity loan 40% of the open market value = £168,000
  • - Remainder available to purchaser £59,500

Examples:

Start of year Estimated annual change in property price Total property value London HTB home owner entitlement to 60% of property value Agency entitlement to 40% of property value
1 5% £400,000 £240,000 £160,000
2 5% £420,000 £252,000 £168,000
3 5% £441,000 £264,000 £176,400
4 5% £463,050 £277,830 £185,220
5 5% £486,203 £291,722 £194,481
6 5% £510,513 £306,308 £204,205
7 5% £536,038 £321,623 £214,415
8 5% £562,840 £337,704 £225,136
9 5% £590,982 £354,589 £236,393
10 5% £620,531 £372,319 £248,213
  5% £651,558 £390,935 £260,623

Interest fees assuming RPI at 5%

Start of year London HTB equity loan assistance Estimated RPI (5%)+1% Interest fee percentage Annual interest fee and management fee due Estimated monthly payment (interest and management fee)
1 £160,000 6% 0% £12 £1
2 £160,000 6% 0% £12 £1
3 £160,000 6% 0% £12 £1
4 £160,000 6% 0% £12 £1
5 £160,000 6% 0% £12 £1
6 £160,000 6% 1.75% £2,812 £234
7 £160,000 6% 1.86% £2,980 £248
8 £160,000 6% 1.97% £3,158 £263
9 £160,000 6% 2.08% £3,347 £279
10 £160,000 6% 2.21% £3,547 £296

Under the illustration of London Help to Buy, after six years of ownership, if the buyer decides to sell and house prices have grown for example by 5% every year, the buyer will have to repay £214,415 on their equity loan of £160,000. The owner will have also paid £2,812 in fees on the Help to Buy equity loan. This means the total amount payable after five years on the Help to Buy original assistance of £160,000 is £217,227. For this example, this is equal to an APR 5.27% typical.

Loan repayment assuming property price increase of 2% per annum

Start of year Estimated annual change in property price Total property value London HTB home owner entitlement to 60% of property value Agency entitlement to 40% of property value
1 2% £400,000 £240,000 £160,000
2 2% £408,000 £244,800 £168,200
3 2% £416,160 £249,696 £166,464
4 2% £424,483 £254,690 £169,793
5 2% £432,973 £259,784 £173,189
6 2% £441,632 £264,979 £176,653
7 2% £450,465 £270,279 £180,186
8 2% £459,474 £275,685 £183,790
9 2% £468,664 £281,198 £187,466
10 2% £478,037 £286,822 £191,215
  2% £487,598 £292,559 £195,039

Interest fees assuming RPI at 3.5%

Start of year London HTB equity loan assistance Estimated RPI (5%)+1% Interest fee percentage Annual interest fee and management fee due Estimated monthly payment (interest and management fee)
1 £160,000 4.50% 0% £12 £1
2 £160,000 4.50% 0% £12 £1
3 £160,000 4.50% 0% £12 £1
4 £160,000 4.50% 0% £12 £1
5 £160,000 4.50% 0% £12 £1
6 £160,000 4.50% 1.75% £2,812 £234
7 £160,000 4.50% 1.83% £2,938 £245
8 £160,000 4.50% 1.91% £3,070 £256
9 £160,000 4.50% 2.00% £3,207 £267
10 £160,000 4.50% 2.09% £3,351 £279

Under the illustration of London Help to Buy, after six years of ownership, if the buyer decides to sell and house prices have grown for example by 2% every year, the buyer will have to repay £180,186 on their equity loan of £160,000. The owner will have also paid £2,812 in fees on the Help to Buy equity loan. This means the total amount payable after five years on the Help to Buy original assistance of £160,000 is £182,998. For this example, this is equal to an APR 4.97% typical.