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Help to Buy: Equity Loan scheme - update for new and existing first time buyers

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First time buyers currently in the process of buying their home through the Help to Buy: Equity Loan scheme in England will be relieved to hear that the deadline to legally complete their purchase has been extended by two months to 31 May 2021.

This could save around 16,000 purchases that were at risk of falling through due to delays caused by the Covid-19 pandemic.

The government states that there will be no more extensions, so encourages home builders and buyers to proceed swiftly to ensure their property is built and the conveyancing completed by the deadline.

For buyers who have recently started looking for a home, applications for the 2013-2021 scheme have now closed. Instead, first time buyers can take advantage of the new Help to Buy: Equity Loan scheme (2021-2023) which opened to applications on 16 December 2020 and will officially start on 1 April 2021.

What is Help to Buy?

Help to Buy is a series of government schemes designed to help first time buyers in England (and sometimes people who used to own property but can no longer afford to) get on the property ladder.

Various schemes have come and gone over the years, including:

Existing schemes include:

Wales also has its own property ownership schemes, including:

How does the England Help to Buy: Equity Loan scheme work?

The basic premise of the Equity Loan scheme is, if you are a first time buyer looking to buy a new build property, the government can provide a maximum 20% loan (40% in London) to put towards the deposit. This means that the buyer only needs to raise a 5% deposit and can get a 75% mortgage for the rest of the purchase price.

The buyer does not have to pay interest to the government for the first five years they own the property. However, when they sell, they must return the same proportion (e.g. 20%) regardless of how much the property has gone up in value.

The first Equity Loan scheme ran from 2013 and is officially due to end on 31 March 2021. However, the deadline to complete and take advantage of the loan has been extended to 31 May for buyers currently involved in conveyancing transactions.

The new Equity Loan scheme is due to start on 1 April 2021 and will run to 2023. Applications for the new scheme opened on 16 December 2020.

What is the difference between the old and new Help to Buy: Equity Loan schemes?

Under the old scheme, you could get a loan on a new build property up to £600,000 anywhere in England. You could also take advantage of the scheme if you were not a first time buyer, so long as you did not currently own property.

Under the new scheme, there are regional price caps. For example, in London, the maximum purchase price of the property is still £600,000, but in the North East, the highest price property you can buy using the scheme is £186,000. These caps are supposed to reflect average regional property prices. You must also be a first time buyer to take advantage of the scheme.

How does Help to Buy – Wales work?

Help to Buy – Wales works in a similar way to the England scheme. Under the scheme, buyers can get a shared equity loan of up to 20% to buy a new build property worth up to £300,000. The buyer only needs to provide a 5% deposit and take out a mortgage to cover the rest.

Why has the deadline for the England 2013-2021 scheme been extended?

The government has extended the deadline three times over the past year in response to delays caused by the Covid-19 pandemic and Brexit. Issues that have affected the Help to Buy industry include:

  • Delays on building sites caused by staff absences, self-isolation requirements and health & safety concerns
  • A shortage of building materials and labour
  • Delays caused by the coronavirus lockdown and government restrictions on the housing market
  • Delays in the conveyancing process caused by a backlog of transactions and overwhelming demand due to the Stamp Duty Land Tax holiday and Land Transaction Tax holiday

Are you a first time buyer looking to buy in England or Wales?

At hpjv, our specialist conveyancing solicitors can help first time buyers in England and Wales who are buying a home using Help to Buy. Our Conveyancing team are accredited with the Law Society Conveyancing Quality Scheme, which demonstrates our ability to handle property transactions quickly and effectively.

For more information or to speak to one of our Help to Buy solicitors in Newport, give us a call or fill in our simple online enquiry form and a member of our team will be in touch shortly.