Help to Buy Equity Loan scheme is changing

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19 January, 2021

The existing Help to Buy Equity Loan Scheme is set to be replaced with a new Help to Buy Equity Loan (2021 - 2023) on 1 April 2021. The new scheme will be extended to first-time buyers only along with the introduction of regional price limits. First-time buyers who apply for the loan must use it towards buying a new-build home.

The existing scheme allows both first-time buyers as well as existing homeowners to use the Government backed Help to Buy Equity Loan to buy a new-build home. Homeowners wanting to use the existing Help to Buy Equity Loan scheme have less than three months to apply for the same but must bear in mind that the legal completion of the sale must happen no later than 31 March 2021.

Under the new scheme, first-time buyers will still be able to borrow up to 20% (40% in London) of the cost of a newly built home. A minimum of 5% deposit for the home will then be needed to be paid by the buyer with the remaining cost of the property to be funded via a help to buy mortgage. The Equity Loan backed by the government will be interest free for the first five years, after which, interest rates will start at 1.75%, rising each year in April by the Consumer Prices Index plus 2%. Borrowers of the Equity Loan will also be charged a monthly management fee of £1.00 for the term of the loan.

First-time buyers who wish to buy a new build home under the new scheme can reserve their new home from 16 December 2020 but will not be able to move in until 1 April 2021. The new scheme is set to run from April 2021 to March 2023.

In addition to only being available to first-time buyers, the new scheme will also see the introduction of regional price caps. This means to be eligible for the loan, the purchase price of the Help to Buy property will have to be below the set maximum price for the relevant region. The price caps are as follows:

  • North East - £186,100;
  • North West - £224,400; Y
  • Yorkshire and The Humber - £228,100;
  • East Midlands - £261,900;
  • West Midlands - £255,600;
  • East of England - £407,400;
  • London - £600,000;
  • South East - £437,600
  • South West - £349,000.

Homes England envisages that the new scheme will build on the success of the existing Help to Buy scheme which helped more than 270,000 people into home ownership, of which 82% were first-time buyers. Help to Buy has given homebuilders the confidence to keep building especially during the Covid-19 pandemic which has a caused a slowdown in most sectors including housing.

If you require assistance and guidance with the new Help to Buy scheme, please do get in touch with either Lauren Fisher on 01254 222345 or email lauren.fisher@forbessolicitors.co.uk or Andrea James on 01772 220206 or andrea.james@forbessolicitors.co.uk

Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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