02 August 2022

It was recently announced that the government-backed Help to Buy equity loan would be ending two months earlier than initially anticipated. What does this mean for first time buyers?

What is the Help to Buy Scheme?

The Help to Buy (England) equity loan scheme is a government initiative designed to help first time buyers to get on the property ladder. Using Help to Buy, buyers purchasing a new-build home only have to have a 5% deposit. The government provides a 20% equity loan, meaning the buyer only has to secure a mortgage for the remaining 75% of the property value.

A 75% Loan to Value mortgage will be eligible for a wider variety of mortgage deals at better interest rates compared to a 95% Loan to Value, making the borrowing and repayments more affordable.

Recently released government figures indicate that the scheme had been used in the purchase of 355,634 properties (up until the end of 2021), worth a combined total of £99bn, with the total value of the loans totaling £22bn. 

When is Help to Buy ending?

On 20 May, Homes England, who run the scheme, announced a new deadline for the scheme. Applications for the scheme will have to be submitted by 6pm on 31 October 2022, and the purchase legally exchanged before the end of March 2023. 

The Help to Buy scheme was introduced by then Chancellor George Osborne in 2013, intended to help reinvigorate the flailing house market at the time. Initially, the scheme involved two parts; a mortgage guarantee as well as the equity loan scheme. Crucially, they were available to all homebuyers. 

Since December 2020, the equity loan scheme changed to only being open for first-time buyers, and regional price caps were introduced for qualifying properties. For properties within London, homebuyers could take advantage of a government loan up to 40% of the purchase price up to £600,000. Outside of London, the price cap varies between £186,100 and £437,600, with buyers being able to borrow a 20% equity loan. 

Is there still time to use Help to Buy?

At time of writing, there are still many months until the application deadline of 6pm on 31 October 2022, with the legal exchange deadline on 31 March 2023. However, the application process can be lengthier than the average purchase, so it is highly recommended to apply as soon as you are ready to avoid disappointment. By choosing a registered Help to Buy Estate Agent such as ourselves, you are more likely to experience a smooth and seamless application process. 

Who is eligible for Help to Buy?

In England, to be eligible for the Help to Buy scheme you must:

  • Be aged 18 or over

  • Be a first time buyer

  • Be able to afford the fees and repayments

  • Can provide a 5% cash deposit

There are also restrictions on the sort of properties that are eligible. For Help to Buy, the property must:

  • Be a new build that will be your main residence

  • Be sold by a Help to Buy registered home-builder

  • Be the only property that you own

You can not use Help to Buy to purchase a second home or a buy to let property.

You can apply for Help to Buy as a solo buyer, if you meet all of the qualifying criteria. For those who are married, in a civil partnership or cohabitating, a joint application must be made.

What are the costs of Help to Buy?

In addition to the usual costs and fees of buying a home, such as mortgage arrangement fees and legal costs, you will also need to pay a monthly management fee of £1 for your Help to Buy equity loan. Additionally, you will be charged administration fees if you make changes to your equity loan, such as remortgaging or making a partial equity loan repayment.

Interested in using Help to Buy for your first purchase?

As a registered Help to Buy Estate Agent, we are well placed to help you make use of the scheme for your first home purchase. We have a range of studio, one bed and two bed properties available that are eligible for the scheme. Speak to one of our friendly team or book a viewing appointment to start your help to buy journey before the scheme expires.

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