Help to Buy is a Government-backed equity loan scheme open to purchasers of new build homes. The current scheme, available to those buying new homes priced below £600,000 in England, will end on March 31, 2021.
What is Help to Buy?
Help to Buy is a Government scheme designed to make moving more affordable as it allows you to move with just a 5% deposit. You will receive an equity loan from the Government for up to 20% of the purchase price (40% if you’re in London), which means you need only apply for a 75% loan to value mortgage from your lender of choice.
The equity loan is interest-free for the first five years and you only need to pay it back when you either pay off your mortgage, sell your home or come to the end of your equity loan term.
After the first five years you will pay a monthly interest fee of 1.75% on the loan element. Your interest fee will rise each year in April by the Retail Price Index (RPI) plus 1% until it is repaid. You can pay back the equity loan in full at any time or in 10% chunks whenever you like.
Just as the amount you borrow is calculated as a proportion of your home’s value, so is the amount you pay back. So if the value of your home increases, the amount you will need to pay back on your equity loan increases by the same percentage. The same applies if your house value decreases – the amount you need to pay back will also be reduced.
If you’re in Wales, Help to Buy Wales is currently available on all Welsh new build homes priced up to £300,000.
What is changing?
The current scheme in England is due to end on March 31, 2021. After that date, the new scheme, known as Help to Buy: Equity Loan (2021-23), will only be available to first time buyers. New regional prices caps will also apply.
Applications for the Help to Buy 2021-2023 scheme can be made from autumn 2020 and the scheme will run for two years.
If you’ve applied for a Help to Buy Equity Loan under the current scheme (and there’s still some time if you would like to do this), your builder needs to finish building your home by February 28, 2021. You will also need to legally complete your purchase before the March 31 deadline.
If you reserved with Help to Buy before June 30, 2020, and you’ve experienced severe delays with your purchase due to Covid-19, you may be given additional time to complete. If this affects you, please visit the Gov.uk website to find out more.
Purchasers using Help to Buy Wales can reserve a home using the existing scheme until March 2021 and must legally complete on their home by 23 December 2021. The scheme is set to be extended until at least March 2022 but the price cap will be reduced to £250,000 and homes will need to be broadband ready.
A vital helping hand
Since its launch the scheme has helped over 270,000 people to buy a brand new home in England, with the Government loaning more than £16 billion to homeowners.
It’s offered a lifeline to many and made the dream of home ownership possible for over 220,000 first time buyers.
In fact, the vast majority of purchasers who have used the scheme (82%) have been buying their first home.
Among them are Marie and Phil, who purchased a new home at Rayne Gardens in Essex after saving up for a deposit by living with Marie’s parents.
Marie said: “I’m totally convinced by Help to Buy now, and so grateful Redrow explained how it works. It has given us the opportunity to purchase our first home sooner than we otherwise would have been able to and we are also able to save around £350 a month, which can go towards paying back the Government loan.”
Likewise for Rhys and partner Ellie, who have bought their first home at Ledsham Garden Village, in Cheshire, a move was only made possible by Help to Buy.
Rhys said: “Without Help to Buy, owning our ‘dream’ home wouldn’t have been possible – at least not yet. It meant we could afford more than we thought and we could put some of the money we’d saved into furnishing it. It made a huge difference.
“I’ve told all my friends about it and they’ve all been so impressed when they’ve come to see our home. They’re like ‘wow’! I’ve encouraged them all to consider Help to Buy, and I’d recommend it to anyone, especially first-time buyers, looking to get onto the property ladder with their first home.”
For potential purchasers keen to find out more about the current scheme, Redrow is hosting a Help to Buy weekend across many of its developments over the weekend of Saturday 7th and Sunday 8th November.