The Government’s Help to Buy Scheme has been around for nearly a decade, opening the door to home ownership for tens of thousands of first-time buyers. From April 2021, the rules for Help to Buy have changed. This change will last until March 2023 at the earliest.
What are the new rules for Help to Buy?
As of April 2021, only first-time buyers can apply for the equity loan and it must be used in purchasing a new build home. Purchasers can borrow up to 20% (40% in London) of the cost of the new build property, paying a minimum 5% deposit and using a Help to Buy mortgage to fund the rest. The loan is interest free for the first 5 years, after which interest is added. Buyers must also make sure that they deal directly with the home builder, who must be registered with Help to Buy.
The equity loan is worked out as a percentage of the market value of the property when it was purchased, and repayments will only ever cover interest payments. This means that monthly payments will never reduce the amount of money you have borrowed. However, it is possible to make part payments off the loan which must be a minimum of 10% of the loan.
So, as an example, on a £200,000 property you would need a £10,000 deposit and could borrow up to £40,000 through a Help to Buy equity loan, with the other £150,000 covered by a mortgage. If you choose to pay off a part of the loan, the minimum you would be able to pay would be £4,000.
Is there a maximum property purchase price?
The Help to Buy scheme recognises that property prices differ across the country and has introduced varying maximum property prices dependent on area:
- North East - £186,100
- North West - £224,400
- Yorkshire and The Humber - £228,100
- East Midlands - £261,900
- West Midlands - £225,600
- East of England - £407,000
- London - £600,000
- South East - £437,000
- South West - £349,000
If you are interested in purchasing a new home through the Help to Buy scheme, the first thing to do is research new build developments in your area and check to see if the developer has signed up for the scheme. You can also find your local agent on the Help to Buy website.
You should also speak to a mortgage advisor to ensure that you have a mortgage offer in place to begin the purchase of your first home. Not having a proper mortgage offer in place could hold up the purchase (or in some cases end it).
Finally, every property purchase needs a conveyancing solicitor who does all the legal checks and ensures that you are supported throughout the buying process. Jarmans Solicitors have an excellent conveyancing department who provide pragmatic advice and transparent pricing. So, if you’re taking your first step on the property ladder, get in touch with our team.