You may already be familiar with the Help to Buy scheme backed by HM government. With the previous Help to Buy scheme ending and the new Help to Buy 2021-2023 scheme starting, it’s important to understand what changes have been made and how this could affect your new home journey.
Help to Buy has changed
With the new Help to Buy equity loan scheme only first-time buyers are eligible. As a first-time buyer (you and anyone you may be 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
If you meet these criteria, you can borrow up to 20% of the cost of your new build home through the scheme (40% in London). The basic outline of the scheme – your deposit of a 5% or more, up to 20% Help to Buy equity loan, and a 75% Help to Buy mortgage, has remained the same. If you’re an existing homeowner we can offer you a helping hand with other purchase options.
When it comes to selecting your new build property, you’ll need to choose a home that fits within your regional price cap. To give you an idea of what the caps are, for the East Midlands you can purchase a home up to £261,900.
Things you didn’t know about Help to Buy:
Do you want to redecorate or fit a new kitchen that is more to your liking? No problem when you purchase with Help to Buy. If you want to extend your home or convert a bedroom to a bathroom, that is a structural alteration and must be approved by the Help to Buy scheme. Because structural alterations, such as converting a bedroom to a bathroom or adding an extension, can raise the value of your home, they should not be made without permission from the Help to Buy equity loan scheme. If you do not seek permission, your home’s value will generally rise and this will cause you to pay back more than you borrowed.
Repaying your equity loan
For the first five years the equity loan is interest free and you only pay a £1 monthly management fee. From year six, there is interest to pay on the loan and the £1 monthly management fee. The amount you pay back is worked out as a percentage of the market value at the time you choose to repay. If your home’s value rises (or falls) during the life of your Help to Buy equity loan, the amount that you will need to pay will rise (or fall) as well.
You may be wondering, ‘Can I pay back Help to Buy early?’, and the answer is yes! At any time, you can make a part repayment of at least 10% of the current value of your home. And what do you need to do to establish the current value? Schedule a valuation through a Royal Institute of Chartered Surveyors (RICS) who provide you with a comprehensive report.
You must repay Help to Buy equity loan in full:
•at the end of the equity loan term
•when you pay off your Help to Buy mortgage
•when you sell your home
Remortgaging and Help to Buy
Remortgaging is often a part and parcel to owning your own home, there is an additional step or two to remortgage Help to Buy homes. There are a variety of reasons you may want or need to switch lenders, or to borrow more, but it’s important that you speak with a Help to Buy representative first.
If you already have a development or home in mind for the Help to Buy scheme, contact your sales adviser for more information or to discover your next new home by location use our home finder.