Over 250,000 properties were sold under the previous Help to Buy scheme, launched on 16th December 2020, with a focus on ensuring first-time buyers have the opportunity to get on the property ladder, giving them the ability to pick up the keys for a new home from April 1st 2021.
The new scheme will run from April 2021 to March 2023. It is restricted to first-time buyers and includes regional property price caps to ensure the scheme reaches people who need it most.
Under the new scheme, the government will lend buyers up to 20% of the cost of a newly built home, and up to 40% in London.
There are some changes that come with the new scheme which buyers should be aware of.
Regional price caps will be in place instead of a cap of £600,000 across the country. The price caps are the maximum value a property can be in order to qualify for the Help to Buy scheme. In London, the price cap remains at £600,000.
All purchasers involved must not currently, or have ever, owned a home or land either in the UK or abroad. This is a change from the previous scheme where purchasers may have owned a home in the past.
All Help to Buy homebuilders must have agreed to sign up to the New Homes Ombudsman. This Ombudsman supports buyers in resolving, or being compensated for, poor building work and enforces higher building standards. This scheme is launching in 2021.
Homebuilders are not allowed to charge ground rent on new Help to Buy homes.
When deciding if an equity loan is right for you, it’s important to consider the full cost of your borrowing. The equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.
The percentage you borrow is based on the market value of your home when you buy it.
You do not pay interest on the equity loan for the first 5 years. You start to pay interest in year 6, on the equity loan amount you borrowed.
For the duration of the loan, you pay a management fee of £1 per month and interest payments. The interest payment from year 6 is 1.75% of the amount of your equity loan at the time you purchased your property, rising annually from the fifth anniversary of your equity loan by the increase (if any) in CPI (the consumer price index) plus 2% for a maximum time period of 25 years.
The minimum deposit which can be used for the Help to Buy equity loan scheme is 5%. With a maximum equity loan of 40%, as is the case for buyers in London, the maximum deposit a buyer could use is 35%.
You can choose to pay a minimum of 10% of the loan off in one go, at any time, this is known as ‘staircasing’. The repayment for this will be based on an RICS qualified surveyor’s current valuation of the property. The property owner will pay the cost of the survey and the administration of the staircasing or repayment.
You must repay your equity loan in full at the end of the equity loan term when you pay off your repayment mortgage when you sell your home or if you do not follow the terms set out in the equity loan contract. The amount you pay back is worked out as a percentage of the market value at the time you choose to repay.
If your home’s market value rises, so does the amount you owe on your equity loan. If your home’s value falls, the amount you owe on your equity loan falls too.
The scheme is designed purely for Owner Occupiers so you can not rent the property out, but you may rent out a spare room as long as you live in the property.
It is also important to know that you can not owe Help to buy home and buy a second home. If you can afford to purchase another home, you will have to repay the Help to Buy equity loan. The property purchased must be your only residence. Help to Buy is not available to assist buy-to-let investors.
If you dream of holding the key to your own home, Help to Buy Scheme might be just the right thing for you.
Opening the door, going in and being able to say, “This is mine”. People like you have that dream right now. Young working people who want to buy their first home, growing families looking for more space, council and housing association tenants who want to own their own home. Let’s start that journey together.
Well, I hope this helps. Not only do I provide posts to help promote and support the community of Tooting and its surrounding areas, but I am a local property expert too. As always, please do get in touch with me should you need help or advice with the sale or rental of your property, I am here to help.
Chuk - Your Local Property Expert for Tooting and Surrounding Areas
