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Clare Hallett is a Conveyancing Partner at Frettens. In this article she looks at the new help to buy equity loan scheme and the changes that come with it.
What is the new help to buy scheme?
The help to buy equity loan scheme was first introduced back in April 2013; and was open to both home movers and first-time buyers but was restricted to newly built houses.
The new equity loan scheme only includes first time buyers; and regional property price cap restrictions have been put in place.
Click here to read about the regional price caps.
What will the new help to buy scheme do?
Just like the current help to buy scheme, the new strategy will lend buyers up to 20% of the cost of a newly build property (40% for London properties). Of course, this requires a deposit of at least 5% of the purchase price (purchase price limit is up to £600,000).
When will the new help to buy scheme launch?
The current help to buy strategy ends on March 31st 2021, passing the torch to the new equity loan scheme which commences from April 1st and is set to run until March 2023.
Will help to buy be extended for current homebuyers?
Yes, current homebuyers who have submitted a help to buy prior to 15 December 2020 have until 31 May 2021 to legally complete their purchase.
Why is help to buy changing?
Misuse of the scheme
The current help to buy scheme, set to expire March 31st, had received scrutiny; as people who could afford to buy a home had been taking advantage of the 20% loan. According to Government data, 13,000 people with an annual household income of over £100,000 have used the Help to Buy Scheme.
However, the new scheme changes this; limiting it's use to only first-time buyers.
Developer inflation
Another reason why the equity loan scheme has been changed is due to the suspicion that developers have been overcharging buyers for homes bought under the scheme. This has led to the introduction of regional price caps, outlined below.
What are the regional price caps?
| Region | Maximum Price |
|---|---|
| North East | £186,100 |
| North West | £224,400 |
| Yorkshire & The Humber | £228,100 |
| West Midlands | £255,600 |
| East Midlands | £261,900 |
| South West | £349,000 |
| East of England | £407,400 |
| South East | £437,600 |
| London | £600,000 |
How to apply for the new help to buy scheme:
As mentioned previously, to be eligible for the scheme you must:
- be a first-time buyer
- buy a new build home within the relevant regional price cap
The Government have outlined that before applying you must have the funds for:
- a fee to reserve your home (up to £500)
- a 5% deposit on exchange of contracts (if you have a larger deposit, pay the rest on completion)
- other fees on completion (stamp duty, legal fees and mortgage fees)
Can I apply for the new help to buy scheme right now?
Yes, first-time buyers who are eligible for the scheme can apply right now. Once a buyer's place is reserved under the new strategy, they can move in when the scheme officially launches (1st April).
Conveyancing Solicitors in Bournemouth, Christchurch, Ringwood
If you are looking to move and have a question about conveyancing costs or the new help to buy scheme, don’t hesitate to get in touch. One of our bright team will be more than happy to answer your questions or provide you with a quote.
Alternatively, you can use our quick conveyancing calculator or read Kym Gaisford’s guide to conveyancing costs here.
