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The new Help to Buy Scheme - what's changed?

Are you considering buying a home using the Help to Buy Equity Loan scheme? Then it’s essential you know about major changes to the scheme that now apply.

The new scheme means new rules. These affect who can use it and the value of the property you can buy through it.

Here’s what you need to know….

 

What is the Help to Buy Equity Loan scheme?

The Help to Buy Equity Loan scheme was launched by the government in 2013. It was one of a number of measures introduced to help people get on the housing ladder. 

There are different Help to Buy Equity Loan schemes for England, Greater London, Wales and Scotland. They all vary; the below information relates to England and Greater London only.

The new scheme starts from 1 April 2021 and will run until March 2023. It’s already open if you want to use it to reserve a home. However, you won’t be able to actually move into your new property until 1 April 2021 onwards.

 

Old scheme vs new scheme: what’s changing?

Many key features remain the same: the Government will still lend buyers up to 20% of the value of their new-build home (up to 40% in London). However, there are some major changes:

  • Only first time buyers can use the new scheme. The majority of the people who take advantage of the scheme are first time buyer, however it was open to anyone. Now you will not be able to use the new scheme if you’ve owned property before.
  • Regional price caps have been introduced. Anyone buying a home in England using the original scheme could purchase a property up to a maximum value of £600,000, regardless of where the property was located. However, under the new scheme, regional price caps have been introduced. These have been set at 1.5 times the average first-time buyer price in each region, as of autumn 2018.

 

Help to Buy: Equity Loan price caps – April 2021 to March 2023

Region

Maximum property
price

North East

£186,100

North West

£224,400

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

 

Key things to know about paying back your equity loan

There are some important factors to consider when it comes to Help to Buy Equity Loans.

  • When you take out your Equity Loan, you’re borrowing a percentage of your home’s value from the government. So if your Equity Loan is 20% of the value of the property when you buy it and the value of your home rises, you’ll need to repay 20% of the new value of the property when you sell it or pay off your equity loan, not the original amount you borrowed. Similarly, if the value of your property decreases, you’ll pay back 20% of the reduced value when you sell it or repay your Equity Loan, not the original amount.
  • The first five years of your Help to Buy Equity Loan are interest-free. However, in the 6th year you’ll be charged a fee of 1.75% on the loan’s value. After this, the fee will increase each year in line with inflation. The annual increase in the fees is worked out by using the Retail Priced Index (RPI) plus 1%. 

 

For more information about the Help to Buy Equity Loan, feel free to get in touch: 02380 425925 or [email protected]

Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.

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