New Help to Buy 2021-2023

With the government changing the Help to buy criteria, here is the latest changes for all First-time Buyers

 

We will review what it is, how to apply, & what homes can be purchased, a great guide for first-time buyers.

As before the scheme is intended to help first-time buyers buy a new build home with as little as 5% deposit, the government will then top up with an equity loan of 20%, or 40% in London.

One of the major changes is the new version of Help to Buy is only available for first-time buyers and only open till 2023.

So, what do you need to know:

What is the Help to Buy scheme 2021-2023?

It is the newest version of the Help to Buy equity loan initiative.

If you are a first-time buyer it enables you to buy a house with 5% deposit, then the government will provide an equity loan of 20% or 40% if within London.

It is an interest free equity loan for five years

It enables the potential to qualify for lower rates on your mortgage as the loan to value (LTV) becomes 75%. Typically loan to value figures above this tend to have an increase interest rate.

The new Help to Buy scheme will run for two years from 1 April 2021, but you can apply from the 16^th December.

What has changed from the old Help to Buy?

Previous Help to Buy was available to everybody, however the latest version will only be available to first-time buyers.

The aim from the government is to assist those most needed who do not currently own a property and wish to get onto the ladder. Don’t be worried though, if you are not a first-time buyer there are other government schemes to help purchase your property.

It has now introduced regional pricing limits that have been calculated by reviewing the average first-time buyer house price in the regional and multiplying by 1.5 times.

This ranges from £186,100 to £600,00, the table below confirms all price caps for specific regions.

Regional price caps:

Region	Price cap for Help to Buy 2021-2023
North east	£186,100
North west	£224,400
Yorkshire and 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

Housebuilders also now have to comply with more rigorous conditions, including following the Consumer Code for Home Builders and joining to the New Homes Ombudsman, which will be due to be launched in 2021.

Are you eligible?

The scheme is available to first-time buyers only.

This is defined by someone who has never owned a property/land either in the UK or abroad.

A legal declaration will need to be signed to confirm that you a genuine first-time buyer.

If you are jointly purchasing, then both parties will need to be first-time buyers to take advantage of the scheme.

The usual criteria also apply with regard to being able to fund the remaining 80% through deposit and mortgage company affordability tests and conditions being for filled.

When do you need to pay the loan back?

As previously mentioned, the loan is interest free for the first five years but throughout the life of the loan a £1 management charge is paid monthly.

After the first five years have been completed, interest will be charged at an initial rate of 1.75%, this will then rise each year by inflation as measured by the Consumer Prices Index plus 2%. 

It is a second charge on your home and will need to pay off either when you sell the property, pay off your mortgage or by naturally reaching the end of the loan term.

You have the option of repaying the loan sooner, but the repayments must be equal to at least 10% of the value of your home at that time, with the option to repay 10%, 20%, if you reside in London, the previous increments plus 30% are against the 40% equity loan. An administration fee will also be charged at each payment point.

The equity loan will rise and fall in line with your property value and therefore the amount you pay back may be higher or lower than the original amount.

What type of property can I purchase with Help to Buy? 

A new-build property must be purchased with the Help to Buy scheme. 

The benefits of a new build are usually, 10 years National House Building Council (NHBC) warranty, low maintenance, and also tend to have a higher energy efficiency rating, meaning they are more cost effective to run appose to older properties.

An added benefit may be the ability to by off plan on a new estate, potentially giving you the benefit of property value growth.

So, how do I apply?

Homebuilders that are part of the scheme will display the Help to Buy logo on their websites and will advertise the homes that are eligible.

Prior to applying for the equity loan, you must reserve the home you wish to buy with a fee, no more than £500, if for any reason you are not eligible for the Help to Buy scheme your deposit will be refunded.

A local help to buy agent will help you with the application process, click here to find your local one Find your local Help to Buy agent | Help to Buy

Upon equity loan approval, you will be given the Authority to Proceed, which will then be valid for three months. Then you can apply for a repayment mortgage.

Contracts must exchange within three months of receiving the Authority to Proceed and complete the purchase within six months of exchanging contracts.