How Help to Buy Schemes can help First Time Buyers

How Help to Buy Schemes can help First Time Buyers

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The Government have replaced the Help to Buy Equity Loan scheme with a new scheme that is restricted to first-time buyers only and introduces regional price limits. The new scheme was introduced in April 2021 and will run until 2023, known as ‘Help to Buy: Equity Loan’. 

What is different about the new Help to Buy: Equity Loan?

Whereas the previous scheme allowed both first-time buyers and existing homeowners to use the Government-backed Help to Buy scheme, now only first-time buyers can apply for the new Help to Buy: Equity Loan.

The new scheme now has regional property price caps to ensure it reaches the people who need it most. The Help to Buy: Equity Loan is supported by the government and helps towards the cost of buying a new-build home. 

The minimum you can borrow is 5% and the maximum is 20% (40% in London) of the full purchase price of a new build home and must be used for your house deposit. When using the scheme, you must also be buying your home from a homebuilder registered for Help to Buy: Equity Loan. The amount you pay for a home depends on where in England you buy it.

You should then use a help to buy mortgage to fund the remaining cost of the property. The loan is interest-free for the first five years and then interest fees start at 1.75%. They rise each year in April by the Consumer Prices Index, plus 2%. Borrowers are also charged a monthly management fee of £1 for the term of the loan.

Regional Price Caps

Along with restricting the new loan to first-time buyers only, the Government has also introduced regional price caps. This means that homes eligible for the loan must below the set maximum price. The price caps are:

RegionMaximum Property PriceApril 2021 to March 2023
North East£186,100
North West£224,400
Yorkshire & 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

To conclude…

First-time buyers who want to use the Help to Buy: Equity Loan have been able to reserve their new home using the scheme from 16th December 2020, but they were not allowed to get the keys to move in until the 1 April 2021.The intention of the scheme is to help homebuyers get onto the property ladder with a smaller deposit, at a time where there are fewer options open to them. Housing, like most sectors, experienced a slowdown during the Coronavirus pandemic. But Help to Buy schemes continue to give homebuilders the confidence to keep on building.

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