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As of the 1st April 2021 the current Help to Buy equity loan scheme will be restricted to first-time buyers and regional property value price caps will be introduced. You can apply for the new scheme from 16th December 2020 which will end in March 2023. If you are buying using the current Help to Buy scheme you will need to complete your purchase by 31st March 2021. The new scheme aims to financially help first time buyers to get on the property ladder.
To be eligible for the new Help to Buy scheme you and anyone you are buying with must be first-time buyers. If you are married or in a civil partnership you will have to make a joint application with your spouse or civil partner.
The value of the property, to which this loan can apply, is capped based on the area the property is situated in. You can access the government's Help to Buy Equity loan website via this link: http://www.helptobuy.gov.uk/equity-loan/help-to-buy-equity-loan-2021-2023/
The scheme will provide an equity loan of a minimum of 5% and up to 20% of the market value of the newly built property. This can increase to 40% if the property is in London.
You will be required to pay a minimum deposit of 5% of the purchase price. You must also arrange a repayment mortgage of at least 25% of the purchase price.
The equity loan will be secured against your property in the same way as a repayment mortgage.
You can find a third party calculator for the Help to Buy Equity loan here at www.bankrate.com.
There are no monthly repayments to reduce the total amount of equity loan you borrow. You can pay off all or part of your equity loan any time before then. Part repayments must be at least 10% of your property value at that time.
When you repay your loan in full or in part the amount you pay back is calculated as a percentage of the market value at the time you choose to repay. For example, if the property value increases you will have to repay more than the original loan amount.
The first 5 years of the loan term is interest free. From the 6th Year onwards, you will be required to pay a monthly interest fee of 1.75% of the equity loan. Interest fees will rise for each following year in April by the Consumer Price Index (CPI), plus 2%. You will continue to pay interest until you repay your loan in full.
If you require further assistance or advice on any of the above please do not hesitate to contact our Residential Conveyancing Property team via email at [email protected] or by contacting our Chichester, Fareham or Havant office.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice, and should not be relied upon as advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. All content was correct at the time of publishing. Legal advice should always be sought in relation to specific circumstances.