Are you thinking of getting a foot on the property ladder or wanting to ‘upgrade’ your present home? If so, the Government’s Help to Buy equity loan scheme may be just what you need to help achieve your dream home. Unfortunately, however, the Government has stated that intends to stop the scheme in the coming years.
What is the Help to Buy Scheme?
The scheme, first launched in its present form in April 2013, has so far helped over 183,000 people to get on, or up the housing ladder.
The scheme is a government loan towards the price of your property. This is often known as an “equity loan”. Equity loans are open to both first time buyers and existing property owners in properties within England. The maximum purchase price is £600,000 and the property being purchased must be a new build property.
How does it work?
With an equity loan, you will only need a 5% deposit. The Government will also give you a loan of up to 20% of the purchase price. This means that you would only need a mortgage for 75% of the purchase price of the property.
If the property costs £200,000.00 (100%), the deposit would be £10,000.00 (5%), the government loan would be £40,000.00 (20%) and the mortgage £150,000.00 (75%).
The equity loan is interest free for the first five years. If you pay it back after the first five years, then the interest rate applicable will depend on the prevailing interest rates at that time.
You can pay back part of your loan at any time with no additional fees. The minimum percentage you can pay back at any time is 10% of the current market value of your home.
When will it end?
Despite the success of the Help to Buy Scheme the 2018 Budget advised that the Help to Buy equity loan scheme will come to an end in 2023.
First time buyers in England will be able to obtain loans from Help to Buy until March 2023. However, from April 2021 the Scheme will no longer be available to purchasers who already own a property.
The budget advised “the government does not intend to introduce a further Help to Buy Scheme after March 2023”.
It is therefore important that if you feel you would benefit from the Help to Buy Scheme to purchase a new home or to move home that you act soon before the Scheme ends.
That being said, this week’s general election may affect this. We will keep you posted of any changes.
How to apply
Your financial adviser will be able to advise you as to whether you would qualify for the scheme. You can also apply/check direct on your local Help to Buy Agent website.
The scheme is not limited to people with low incomes and is open to everyone to apply.
Why new build?
If purchased through an approved Help to Buy builder the property is backed by an approved new build guarantee scheme such as NHBC, LABC, Premier Guarantee and Zurich etc. During the first two years the property is therefore covered for failure by the builder to meet the warranty providers requirements. During the following seven years the property is covered for any structural damage that may occur under the warranty.