Many of you may be aware of the previous Help to Buy scheme, well the good news is another is on it’s way, aimed specifically for first-time buyers. The scheme allows successful applicants to apply now for an equity loan and use the scheme to buy their new-build home on or after 1 April 2021.

The Help to Buy scheme is part of a larger policy helping people into homes through equity loans for first-time buyers, shared ownership and a £12 Billion investment in ‘affordable housing’ is aimed at helping the first-time buyer into the housing market whilst supporting the housebuilding sector during this particularly difficult time.

The way the scheme will work is relatively simple. First-time buyers that wish to buy a new-build home will be able to apply for an Equity Loan from the government for up to 20% of the home’s value (40% in London). The home-buyer then pays a deposit of 5% or more, with the remainder being covered by a mortgage of 25% or more of the value of the new home (55% in London).

The home that you buy must:

  • be a new build
  • have a purchase price of up to £600,000 in England (or £300,000 in Wales)
  • be the only property you own
  • not be sub-let or rented out after you buy it
  • be one that you can show you cannot afford ordinarily

In addition to mortgage repayments, you’ll have to pay equity loan fees, but not for the first 5 years. In the sixth year, you’ll be charged a fee of 1.75% of the Equity Loan’s value. The fee then increases every year, according to the Retail Prices Index plus 1%.

Fees do not count towards paying back the loan, which must be paid back within 25 years or when you sell the property. This payment will be pro-rata to the loan amount.

For example, if your home is bought for £250,000 with a 75% mortgage, a 5% deposit and a 20% Equity Loan and it then goes up in value by 30% over 10 years, you would have equity in the property of £75,000 in total. The repayment of the Equity Loan capital as and when you sell would cost you £65,000 (£50,000 initial 20% loan plus 20% of the Equity created).

Contact us or book a free call or video appointment to speak to a specialist Help to Buy mortgage adviser.

Your home may be repossessed if you do not keep up repayments on your mortgage.

There will be no fee for Mortgage Advice. There may be a fee for arranging a mortgage. The precise amount will depend upon your circumstances, but we estimate it to be £399.

Mortgage Required Ltd, Finance House, 5 Bath Road, Maidenhead, SL6 4AQ is authorised and regulated by the Financial Conduct Authority reference 573718 at www.fca.org.uk.

The Financial Ombudsman Service is an agency for arbitrating on unresolved complaints between regulated firms and their clients. More detail can be found on their website: www.financial-ombudsman.org.uk