The Government’s Help to Buy equity loan scheme has been extended to 31 May to allow properties which have been delayed being finalised due to COVID restrictions to be fully built and completed and allow buyers using Help to Buy the chance to still qualify for the scheme. The current deadline had been 31 March which was due to tie in with the end of the SDLT holiday.
This has been a concern for many buyers because developers require an early exchange of contracts, thus locking you into the purchase. They do not, however, provide any guarantee as to the completion date. They provide an estimated completion date but in many contracts the developers allow themselves well over six months delay before the buyer can seek to withdraw from the purchase.
It has been well reported over the last month that there are a number of buyers who have exchanged contracts but where the final deadline by which the developer must have completed the purchase is after the Help to Buy deadline. This is a position that should have been checked and advised on by the buyers’ conveyancer but unfortunately sometimes these dates are missed.
Applications for the current scheme ended on 15 December 2020. It is clear that there is not sufficient time for new applicants to exchange and guarantee their new home is constructed in time for the end of scheme on 31 May 2021.
The Government have introduced a new scheme which runs from April 2021 to 31 March 2023. This new scheme is purely for first time buyers, under the old scheme anyone could obtain an equity loan provided that at the end of the day of completion the house which they were purchasing with the benefit of the equity loan was the only one they owned. There was also a flat limit of £600,000 on the value of the property that you could buy.
Under the new scheme:-
- you must be a first-time buyer
- the new build home you buy must be within the relevant regional price cap
- You and anyone you’re buying a home with must:
- not own a home or residential land now or in the past in the UK or abroad
- not have had any form of sharia mortgage finance.
The regional price cap is as follows:-
The new equity loan allows you to borrow between 5% and 20% of the value of the new build property you wish to buy. In London you can borrow up to 40%.
The following is taken directly from the Help to Buy website at https://www.helptobuy.gov.uk/equity-loan/equity-loans/
Paying back the equity loan
When deciding if an equity loan is right for you, it’s important to consider the full cost of your borrowing:
For the first five 5 years:
- the equity loan is interest free
- you pay a £1 monthly management fee by Direct Debit
From year 6:
- pay the £1 monthly management fee
- pay monthly interest fee of 1.75% of the equity loan
- interest rate will rise each year in April by the Consumer Price Index (CPI), plus 2%
- continue to pay interest until you repay your loan in full
When you take out your equity loan, you agree to repay it in full, plus interest and management fees.
You must repay your equity loan in full:
- at the end of the equity loan term
- when you pay off your repayment mortgage
- when you sell your home
- if you do not follow the terms set out in the equity loan contract and we ask you to repay the loan in full
The amount you pay back is worked out as a percentage of the market value at the time you choose to repay.
Get in touch
In view of the fact all of your circumstances are different, it is always important to seek advice from an experienced law specialist to discuss your circumstances and consider the different options available to you.
If you wish to speak to any of the property conveyancing team about the Help To Buy scheme, or anything related to this, then please get in touch. Either call on 01323 841481 to arrange an appointment or please fill in the form below and someone will get in touch.
Please note that this article does not constitute legal advice. You should always speak to a legal professional to discuss your circumstances and consider your options.