Help to Buy Equity Loan Scheme Ending
Since April 2013, the Government has been operating a Help to Buy Equity Loan scheme for buyers of new build properties. The scheme allows buyers to take a charge on their property of up to 20% (40% within London areas) of the purchase price in a loan from the Government, this is normally a second charge in addition to a standard mortgage.
Buyers don’t pay any interest for the first five years of the loan, so it is seen as a huge incentive to help buyers get on the market or purchase their dream home. Homeowners then repay the loan when they sell their property What they pay back is based on the market value of the property at the time, so it is important to remember that the amount to be paid back will be more than the amount borrowed initially. Homeowners are free to pay back part or all of the loan throughout their ownership if they are able to.
It is estimated that since the scheme launched, it has helped around 230,000 homeowners buy a property, and as it can only be used for new build houses, this has been of huge benefit to many areas of the economy throughout the entire building process.
The scheme was due to end in December 2020 but was extended to February 2021 to allow developers extra time to complete builds. Due to the coronavirus pandemic, the scheme was extended further by one month to the 31st March 2021 to allow properties nearing completion to be completed, this is thought to be due to contractors having issues obtaining materials or labour in the current market. Potential buyers need to be conscious that their mortgage offers do not run out if the developer for their new build property needs the extra time to complete the house build.
The scheme will be replaced by a similar scheme (Help to Buy: Equity Loan 2021-2023) which will only be available to first time buyers and the application process for this loan is already open for interested buyers.
If you have any questions, please contact our property department.