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15th February 2021

All you need to know about the new Help to Buy: Equity Loan scheme coming into place from April 2021

Taking your first step on the property ladder has just been made simpler. Requiring as little as a 5% deposit, as a first-time buyer, you could be settled in your hassle-free, new build home by Summer 2021. 

What is the Help to Buy: Equity Loan Scheme?

The Help to Buy: Equity Loan Scheme is a loan from the Government that is offered to buyers when buying a newly built home from a home builder registered with the scheme. With the scheme in place, the Government offers loans up to 20% (40% in London) to purchase newly built homes.

Whilst the current Help to Buy scheme applications are no longer open, Homes England has just announced an extension for applications that are already underway. Previously, the deadline for sale and build completions was 31st March 2021, but a two month extension to 31st May 2021 has now been granted.  

What does this mean for first-time buyers?

The scheme was created to aid first time buyers in the purchase of their first home. It doesn’t include a discount, or a reduced property price, but simply a means of purchasing a new home through borrowing loans. It does mean that you can look into those properties that you might have initially thought were out of reach or give you more of a priority in those new developments that offer the scheme. To purchase a property, a deposit of at least 5% of your own savings is required, along with the eligibility of the equity loan which can offer up to 20%. This means that a 75% mortgage would still be needed to pay for the full purchase price. 

How is the scheme changing?

Previously, the scheme was offered to all buyers who were eligible, but with the new scheme, applications will only be offered to first-time buyers. A first-time buyer is someone who has never owned a home or residential land in the UK or abroad, and who has never had any form of sharia mortgage. Changes to the scheme also introduce price caps depending on where you are buying your new home. This means that the scheme will only apply to properties up to a certain value, with properties in Yorkshire and the Humber having a price cap of £228,100, and those in East Midlands having a limit of £261,900. 

How do I repay the equity loan?

You only pay interest on the amount you borrowed, which is not repayable monthly but you can pay in part or at any time. The loan is interest-free for the first five years, but after this, a monthly interest of 1.75% which will continue until the loan is fully repaid. 

How do I apply?

Applications for the new scheme opened on the 16th December 2020. Once accepted you can reserve your new build, where you could be moved in from 1st April 2021.  

If you’d like further advice on how to apply for the scheme, our friendly team of experts in the New Homes division are always on hand to help. You can find their contact details here. We have plenty of developments partaking in the new scheme, including Bliss, the next phase of Sky House and Burgess House.