The Help to Buy: equity loan scheme What you need to know before you go ahead

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2 Mortgages Information Page 2 of 5 Repaying your equity loan The example below shows how this works on a property worth 200,000. Your 5% deposit 10k 20% equity loan 40k 150k 200k 75% mortgage from your lender Source: HM Treasury The equity loan must be repaid after 25 years or earlier if you sell your home. You must repay the same percentage to the Government as the initial equity loan, i.e. if you took an equity loan of 20% to help buy your home, you would need to repay 20% of your homes value in the future when you came to either sell, or repay your equity loan. The diagrams below shows the amount you would repay on your equity loan which is linked to the future value of your home. Please note, the value of the equity loan could go up or down. Property value increases by 10% (In this scenario the equity loan amount you would be required to pay back to the Government would be 44k) Property value decreases by 10% (In this scenario the equity loan amount you would be required to pay back to the Government would be 36k) 20% loan 20% loan Now 44k Now 36k 220k 180k

3 Mortgages Information Page 3 of 5 How is the interest calculated on my equity loan? The equity loan provided by the Government is interest free for the first five years of the scheme. After that, if you have not already repaid your equity loan in full, from year six you will pay gross interest to the Government of 1.75% on the outstanding equity loan amount. This amount of interest will increase each year from year 7 by the annual increase in the Retail Price Index (RPI) inflation plus 1%. The example below shows how interest on the equity loan is calculated, if the annual increase in the Retail Price Index (RPI) was estimated at 5%. n From year 6, interest at 1.75% would be charged on the amount of the equity loan. n From year 7, if the annual increase in the RPI was 5% the interest payable on the equity loan would increase by 6% (i.e. increase in RPI of 5% + 1%). So interest on the equity loan would then be charged at (1.75% x 6%) % = 1.86% The table below assumes a mortgage of 150,000 on a property value of 200,000 with an equity loan of 40,000. All rates are for illustrative purposes only. SVR correct as at 25/07/2014. Start of year Equity loan interest rate Government equity loan (Interest Only) Annual gross interest due Estimated monthly payment Santander Help to Buy Mortgage Repayment (capital and interest) Mortgage interest rate (Fixed for 5 years, reverting to Standard Variable Rate (SVR) of 4.74% in year 6) Estimated monthly payment Mortgage and Equity Loan Total monthly payment 1 0% % % % % % % % % % % % % % % % % % % % % % % % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % % 1, % 840 1, % 2, % 840 1,016

The Help to Buy Equity Loan Scheme What you need to know before you go ahead

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The Help to Buy: equity loan scheme What you need to know before you go ahead

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