What you need to know about Help To Buy ESE

Help to Buy East and South East (Help to Buy ESE) provides financial assistance to people who want to purchase a new home in Buckinghamshire, Bedfordshire, Hertfordshire, Essex, Cambridgeshire, Norfolk, Suffolk, Surrey, East & West Sussex or Kent.

The Government will lend you up to 20% of the value of a new-build property meaning that you only need a 5% deposit and a 75% mortgage to buy your new home.

In this article, Lend4 explains:

  • who can apply for Help to Buy East and South East (Help to Buy ESE)?
  • what type of property can you buy?
  • where can you find new properties?
  • how do you repay your mortgage and Help to Buy ESE?
  • can you buy more of your property from Help to Buy ESE?
  • what’s the situation with stamp duty for Help to Buy ESE properties?
  • other things you need to know about Help to Buy ESE

Who can apply for Help to Buy East and South East (Help to Buy ESE)?

You can apply for the Help to Buy ESE scheme if:

  • the value of the property you intend to buy is £600,000 or less
  • the property you intend to buy is new
  • you have a minimum of 5% of the value of the property saved as a deposit
  • you are no older than 75 years of age

The Help to Buy ESE scheme assists both first time buyers and homeowners wanting to purchase new properties. If you are an existing homeowner, you are allowed to reserve your new build property but your existing property has to have been sold before the sale on your new property is completed.

Please note that, from 2021, only first-time buyers will receive help under the Help To Buy ESE scheme (source: Money Advice Service).

What type of property can I buy?

Any property you buy under the Help to Buy ESE scheme must be a new-build property – either a home or an apartment.

The definition of new build is that, when you purchase it, you must be the property’s first registered owner. You’re not able to buy a house or a flat which has come back onto the market.

You may not use Help to Buy ESE to purchase a property with the intention of renting it out – in other words, a buy-to-let property.

You may be allowed to sublet your home or apartment in exceptional circumstances if you are, for example, a member of the Armed Forces and you have to serve away for a considerable length of time on a tour of duty. If this is you, you’ll need permission to do so from Help to Buy ESE and from your mortgage provider.

Where can I find new properties?

You can find new properties either on the popular property listings websites or on homebuilders’ websites.

You can view new properties on the OnTheMarket platform for your county eligible for the Help to Buy ESE scheme by clicking the following links – Buckinghamshire, Bedfordshire, Hertfordshire, Essex, Cambridgeshire, Norfolk, Suffolk, Surrey, East Sussex, West Sussex, or Kent.

How do I repay the mortgage and Help to Buy ESE?

Lend4’s team work successfully with clients every day helping them to navigate the Help to Buy ESE scheme. We see our job as to help you move into your chosen new home as soon as possible and with the best and most affordable mortgage for you and your financial situation.

First thing’s first. There are two different main types of mortgage on the market – repayment and interest-only. With a repayment mortgage, part of each repayment you make pays off a proportion of the original amount of money you borrowed plus interest. With an interest-only mortgage, you only actually pay off interest on the original amount of money you take out – you never actually pay down the money you borrow for your home. This means that, at the end of your term with an interest free mortgage, you will owe the mortgage lender the original purchase price for the property minus your original deposit.

Interest-only mortgages are difficult enough to find anyway but, under the rules of Help to Buy ESE, the mortgage you find for your property must be a repayment mortgage.

Second, every month, you’ll make two repayments on your property – one to your mortgage provider and one to Help to Buy ESE. There’s a £1 a month management fee that you need to pay until your Help To Buy ESE loan is repaid.

No interest is charged on your Help to Buy ESE loan for the first five years however, after this point, you’re charged 1.75% of the outstanding amount in interest. The interest on your Help to Buy ESE loan will increase by the value of inflation (the RPI measurement) plus one percent.

Can I buy more of my property from Help to Buy ESE?

The interest payments you make do not reduce the value of your Help to Buy ESE loan – it’s quite like the interest-only mortgage we mentioned earlier in this article.

You have to have repaid in full your Help to Buy ESE loan within 25 years of purchasing your home or apartment. There are two ways for you to do this – either by selling your property or by “staircasing”.

Your Help to Buy ESE loan is based on a percentage of the value of your property. If you decide to sell and the value of your property has risen 20%, so does the size of the loan you have to repay. Let’s say that you bought a property for £200,000 and your Help to Buy ESE loan funded 20% of that (£40,000). When you come to sell, you achieve a price of £250,000 – a rise of 20%. If you had not paid down any of your Help to Buy ESE loan, the £40,000 you have to repay would also have risen by 20% meaning that you have to pay back £48,000. If the value of your property is less than you bought it for when you sell, the value of your Help to Buy ESE loan falls by the same percentage.

You may choose to reduce the amount of your Help to Buy ESE loan by making lump sum payments. Each lump sum payment must be for a minimum of 10% of your home’s value at the time you make a payment. The value of your home is decided by an independent valuer (whose services you are responsible for paying) and there will usually be a £200 administration fee on top of the lump sum.

You can choose to repay the Help to Buy ESE loan you take out in its entirety in one lump sum if you have the money to do so.

What’s the situation with stamp duty for Help to Buy ESE properties?

Stamp duty is payable on residential property sold for more than £125,000 – your solicitor normally pays it on your behalf from the funds that you deposit with them for the purchase of your new home or apartment.

In an attempt to encourage more first-time buyers to join the market, stamp duty has been abolished on property purchases valued at £300,000 or less, as you can see from the table below.

Band Normal Rate First time buyer rate Additional Property
£0-£39,999 0% 0% 0%
£40,000-£124,999 0% 0% 3%
£125,000-£249,999 2% 0% 5%
£250,000-£300,000 5% 0% 8%
£300,001-£500,000 5% 5% 8%

 

If the price of a first-time buyers’ property is greater than £500,000, there are no Stamp Duty discounts.

Band Normal Rate Additional Property
£500,001-£925,000 5% 8%
£925,001-£1,500,000 10% 13%
£1,500,001 and more 12% 15%

 

Any Help To Buy purchases for first-time buyers over £500,001 up to £600,000 would incur a Stamp Duty charge of between £15,000 and £20,000.

If you are an existing homeowner using the Help to Buy ESE scheme to fund your next purchase, first-time buyer stamp duty rates don’t apply.

Other things I need to know about Help to Buy ESE

Your first steps will be to appoint a solicitor and, if you choose, a mortgage broker. Lend4’s team of mortgage brokers are experienced in working successfully with clients wishing to use the Help to Buy ESE scheme.

Once you have selected the property you want to buy, you’ll need to let the developer know which property you want as well as apply to Help to Buy ESE. When your application is approved, you and the solicitor you’re working with will receive something called an “Authority to Proceed” from Help to Buy ESE.

When your solicitor lets Help to Buy ESE that you’re ready to exchange, Help to Buy ESE then issues an “Authority to Exchange”. Your solicitor will complete all of the necessary paperwork and, when they’re finished, you’ll own your brand-new home.

You can download the Government’s Help to Buy Buyers’ Guide by clicking here.

Help to Buy ESE – help from the mortgage expert

If you want help to buy a new-build property and if you want the help of an experienced team to take you through the entire process, please contact the team here at Lend4.

Lend 4 enjoys great working relationships with Help to Buy ESE mortgage providers and we can match your personal and financial circumstances to lenders so that you secure a competitive and affordable mortgage on the best possible terms.

In some cases, it may be cheaper for you to arrange a 95% mortgage than to borrow 20% from Help to Buy ESE and arrange a 75% mortgage as well. Speak to one of our colleagues who will be able to provide you with a comparison for your situation.

We’d love to hear from you so please do call Lend 4 on 03330 161 444 or email info@lend4.co.uk.