Help to Buy Scheme
The Government Help to Buy has ended, what’s next?
The government Help to Buy equity loan scheme has helped over 350,000 first-time buyers to purchase a brand-new home in England, but it has now closed to new applications. The good news is that a similar scheme Deposit Unlock means you can still buy a new build home with only a smaller 5% deposit, although unlike Help to Buy, its available to all homebuyers not just first-time buyers.
Deposit Unlock - How does it work?
Deposit Unlock is aimed at buyers – both first-timers and those already on the property ladder – who can raise a 5% deposit and want to buy a brand new home. The remaining 95% of the purchase price can then be borrowed from selected lenders and housebuilders participating in the scheme.
When one of our expert mortgage advisers has qualified you for the scheme, the housebuilder will provide you with written confirmation so you can apply to specified lenders for a Deposit Unlock mortgage. The lender will advise if you meet their criteria for a mortgage loan. If successful, you can then reserve your new-build home.
The Deposit Unlock scheme is backed by a developer-funded mortgage indemnity insurance, which covers lenders from any potential loss if the property is sold for less than the owner paid for it. There are no additional costs to the buyer. You will still need to pay stamp duty at the current rate and the usual legal fees associated with buying a property.
The government will lend you up to 20% (or 40%) of the value of your new property through an equity loan, which will be interest-free for the first five years and can be repaid at any time or on the sale of your home.
You can buy a property for up to £600,000 with Help to Buy. Regional equity loan price caps are in place ranging from £186,100 to £600,000.
There is no household annual income limit, but you must not own a home now or in the past in the UK or abroad and not had any form of sharia mortgage finance; customers need to secure up to a 75% mortgage.
The government will lend up to 20% (40% in London) of the value of a new build home through an equity loan. The buyer contributes a deposit of their own of between 5% and 20%, then the Help to Buy scheme tops that deposit up to make it a 25% deposit which leaves the buyer needing a mortgage for 75% of the property value.
The government equity loan is interest free for the first five years after which a fee of 1.75% will be charged from year six, rising annually by RPI inflation plus 1%. The equity loan can be repaid at any time within 25 years (or the terms of the mortgage), or on sale of the property. The initial loan is repaid, plus a proportion of any growth in the property value.
Help to Buy equity loans are available to first time buyers only. The home you want to buy must be newly built and regional price caps apply. You must not own a home now or in the past in the UK or abroad and not had any form of sharia mortgage finance; customers need to secure up to a 75% mortgage.
The current Help to Buy scheme runs to March 2023. There are other similar schemes available in Scotland, Wales and Northern Ireland.