With a whirlwind of a 2020 behind us, and an uncertain 2021 in front of us, I’ve decided to create a series of blogs which will give you some indication of what’s happening now and what’s to come in the property market.
In this blog, I take a look at the Help to Buy Scheme, which changed on December 16th.
The seven-year scheme, which was launched in 2013, allowed first time buyers and home movers to buy new build properties with just a 5% deposit. It gave buyers the option of a 20% equity loan from the government – which was interest-free for five years – and a 75% mortgage. It has now ended to new applicants, and buyers who are already registered on the scheme must complete by the end of March to take advantage of “Help to Buy 1.0”.
The new scheme, “Help to Buy 2.0” – which will commence on 1st April this year – is now open for applications for new builds that will be completed on or after that date. There are some changes to how it works, though.
Firstly, only first-time buyers can apply, not movers. Secondly, there will be a regional cap on house prices that qualify. Whilst in London, it can still be used to buy a property costing up to £600,000, in the rest of England prices will be capped at 1.5x each region’s average first-time buyer house price. In Yorkshire, that figure is £228,100.
There are two main reasons for the changes…
1.It inflated prices
Help to Buy has been very popular with first-time buyers, but developers have faced accusations of inflating the cost of new-build homes, resulting in the government bringing in price caps.
2.It helped people who didn’t need it
Another reason to restrict the scheme is because many people who used it didn’t necessarily need the help – they could have afforded to buy a home on the open market and didn’t require a 20% government loan.
How to apply for the new Help to Buy
You can apply for Help to Buy 2.0 if:
- You have a deposit of at least 5% of the property’s value
- You can afford to pay a fee of up to £500 to reserve the property
- You can afford to pay other costs of moving, such as mortgage fees and legal fees.
The process is as follows:
- Get a Mortgage in Principle so you know what you can afford to borrow
- Find a Help to Buy property via a developer’s website or your local Help to Buy agent
- Reserve the property with a £500 deposit (refundable if you’re not approved)
- Complete the Property Information Form (including details such as income and deposit)
- Get ‘Authority to Proceed’ by the Help to Buy Agent (once they’ve assessed your affordability and eligibility)
- Apply for your mortgage – we’d always advise using a broker
- Appoint your conveyancer
- Get your mortgage offer and complete the legals, before exchanging contracts
- Completion – where your mortgage lender will release the funds and the government will pay your equity loan.
Contact us if you have any questions regarding the new Help to Buy Scheme, or if you’d like to book a free, no-obligation mortgage consultation:
Note: There may be a fee for arranging a mortgage and the precise amount will depend on your circumstances. This will typically be £399 and will not exceed 1.5% of the loan.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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