New Help to Buy Scheme to be launched by the Government

A new Help to Buy Equity Loan scheme will be available to eligible, first-time buyers from the 1st April 2021 year until 31 March 2023. First time buyers can apply for the scheme to a Help to Buy registered homebuilder from 16 December 2020.

First-time buyers can borrow up to 20% of the cost of their home interest-free for the first five years of the loan. Those looking to purchase a property in London can borrow up to 40% interest-free for five years.  After five years, the interest rate will be 1.75% and will then increase each tax year. There will also be a monthly management fee charge of £1 payable throughout the loan’s term.

All buyers are also required to pay a minimum 5% deposit on their home and will need to arrange a repayment mortgage of at least 25% of the purchase price. The Help to Buy Equity loan will be secured against the property in the same way as the repayment mortgage and it must be repaid in full when the property is sold.

First time buyers should be aware that they cannot make monthly repayments to reduce the amount they have borrowed, but can choose to repay it all, or in part, at any time.  It is also important to note that the total amount to be repaid is linked to the value of the property at the point of repayment and is not the amount originally borrowed.  First time buyers might pay back more that they have borrowed.

The new scheme will replace the existing Help to Buy scheme, though homebuilders can still take reservations from house hunters until 15th December 2020 under the existing scheme. The idea behind this is it should allow buyers enough time to legally complete their purchases by the 31st March 2021.

How much will I be able to borrow under the new Help to Buy scheme?

The amount you can borrow as part of the new Help to Buy scheme depends on where you live in the UK. The government has set regional price caps for properties based on 1.5 times the average amount a first-time buyer spends on a property in the area.  Properties that exceed the value of these regional price caps will not be qualify for the Help to Buy Equity Loan Scheme.

The regional price caps:

Region Price cap on Help to Buy homes
North west £224,400
North east £186,100
Yorkshire and The Humber £228,100
West Midlands £255,600
East Midlands £261,900
East of England £407,400
South east £437,600
South west £349,000
London £600,000

The new Help to Buy scheme is designed to help first-time buyers get onto the property ladder, especially during such a turbulent time. Will German, director of Help to Buy at Homes England, added: “Help to Buy has already helped more than 270,000 people into home ownership and 82% are first-time buyers.”

“We’re pleased we can help homebuyers with smaller deposits to own a home, at a time where there are fewer options open to them. Housing, like most sectors, has experienced a slowdown during the Covid crisis. But Help to Buy continues to give homebuilders the confidence to keep on building at a more crucial time than ever.”

Further information on the new Help to Buy Scheme (2021 – 2023) and details of the eligibility criteria can be found by visiting the following Government websites:

Help to Buy Buyer’s Guide

Help to Buy Equity loan info 

An independent financial advisor will be able to help you decide if a Help to Buy Equity Loan is right for you.

If you would like to contact us for a quote so we can assist you buy your first home, please contact nbt@birchallblackburn.co.uk