London Help to Buy launches: your quick guide
Chancellor George Osborne first announced an extension of the Help to Buy: Equity Loan scheme during his Autumn Statement last year in a bid to help people onto the property ladder amid soaring London house prices.
Who is eligible?
The scheme is available to homeowners looking to move as well as first-time buyers, but the property must be a new-build up to a value of £600,000, and cannot be a second home or buy-to-let/investment property. Anyone in England can apply but the property must be their primary residence.
Which lenders are taking part?
So far, Aldermore, Bank of Scotland, Barclays, Halifax, Leeds, Lloyds, Nationwide, Natwest, Royal Bank of Scotland and Teachers Building Societies are offering London Help to Buy.
The government expects other lenders to join the scheme soon.
How does it work?
You put down a minimum 5% deposit on a property in any London borough and you can get an interest-free equity loan from the government for up to 40% of the purchase price.
(In comparison, those buying outside of London receive a 20% loan as part of the Help to Buy Equity Loan scheme.)
So, if you’re buying a house for £420,000, you would get a maximum 40% equity loan (£168,000) from the government and you’d have to get the remaining 60% mortgage (£252,000) from a commercial mortgage lender.
You won’t need to pay back the government loan for five years. You’ll just have to pay your mortgage interest payments to your bank or building society.
In year six, you’ll have to start paying back both the government loan at a rate of 1.75% as well as your mortgage payments.
The 1.75% payable on the equity loan will rise annually with RPI (Retail Price Index) inflation plus 1%.
See the Help to Buy London site for more information and to apply.