As of 31st October, new applications for the Help to Buy: Equity Loan have now closed.
All eligible homebuyers must legally complete by 31 March 2023.
The Help to Buy: Equity Loan is a government scheme designed to help people buy their first home with a deposit as low as 5%.
The loan is open to all (eligible) first-time buyers in the UK. It covers new-build homes across England with a purchase price of up to £600,000, although regional price caps do apply. For London buyers, the price cap is £600,000.
It's important to note, that whilst the current scheme allows for second-steppers to also use Help to Buy, the changes effective from 1st April 2021 state that if any applications are joint to purchase a property, both individuals must be first-time buyers and cannot use the scheme to buy a second home or a property to rent out. This also includes any international properties or residential land.
With an equity loan you'll need to contribute at least 5% of the property price as a deposit. The government will then give you a loan for up to 20% of the price if you’re buying outside of London. In London this increases to up to 40%. Finally, you'll need a mortgage to cover the rest, this varies from 55-75% depending on where in England you are buying.
You won't be charged interest fees for the first 5 years of owning your home. In the sixth year, you'll be charged a fee of 1.75% of the loan's value. After this, the fee will increase every year. The increase is worked out by using the Retail Prices Index plus 2%. You'll also need to pay a £1 per month fee for the lifetime of the loan.
Your Help to Buy agent will contact you before the fees start, to set up monthly payments with your bank. You'll also be sent a statement about your loan each year. Please note, paying the fees do not count towards paying back the equity loan.
The new scheme allows for eligible first-time buyers to apply from the 16th December 2020, and if successful, be able to collect the keys for their new home from the 1st April 2021.
Exceptions are currently in place for those who have applied for the Help to Buy scheme under it's current status, reserved by the 30th June 2020 and have experienced severe delays due to COVID-19. More information on this can be found out via the government website here.
Further information about the Help to Buy: Equity Loan scheme and upcoming changes can be found on the government website.