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Getting on the property ladder has become increasingly difficult over the years and to help first-time buyers, the government has introduced lots of different help to buy schemes that are designed to make buying your first home slightly easier. One recent scheme that lots of people have taken advantage of over the past couple of years is the ‘Equity Loan’ scheme. However, this scheme is coming to an end and there are no plans to extend or replace it. 

If you’re currently browsing the property market and saving for a deposit, you need to act quickly if you’d like to use this government scheme to help you buy a property.   

What is the government’s Equity Loan scheme?

The Equity Loan scheme is essentially a mortgage deposit loan from the government. This scheme was designed to help people buy a new-build property with only a small deposit. Usually, you need a larger deposit to get an affordable loan-to-value mortgage, however, the Equity Loan scheme prevents you from having to save as much and it could make borrowing money from a mortgage lender much easier. 

When using the Equity Loan scheme, the government would lend you up to 20% of the cost of the new build you’re buying, up to 40% in London. You would need to pay back the equity loan by the end of the loan term, when you pay off your repayment mortgage or when you sell your home. Due to the fact it’s an equity loan, the amount you have to pay back may change over time and the loan is worked out as a percentage of the current market value of the property.

The government’s Equity Loan scheme could significantly reduce your monthly mortgage repayments and improving your loan-to-value ratio could help you to get a more competitive mortgage offer. It would also prevent you from having to take out a personal loan for a mortgage, which could have an impact on future mortgage offers. It’s beneficial looking into this scheme in more detail if you’ve found a new build home that you’re interested in buying. 

When does the scheme end?

If you’re considering applying for the Equity Loan scheme, there are a few important dates to be aware of; 

  • You must reserve your home and submit your application by 6 pm on 31st October 2022
  • Your home must reach practical completion by 31st December 2022
  • You must legally complete by 31st March 2023 and have your keys by 6 pm

So, unlike other government schemes, you don’t just need to ensure you’re applying for the Equity Loan scheme in time. It’s crucial to make sure the home builder will have finished building your new home by the end of the year and it must be ready for you to live in otherwise you won’t be eligible for the loan. If you’re worried about a new build property being ready in time, the home builder can provide you with a realistic prediction for practical completion. It’s also beneficial to check with a conveyancer that you would be able to complete on time. 

What other schemes could help first-time buyers?

The government’s Equity Loan scheme won’t be suitable for all first-time buyers and if you’re considering buying a second-hand home or you won’t be able to meet the dates mentioned above, there are other schemes available to consider. You can find out more about government schemes like the Mortgage Guarantee scheme, Shared Ownership scheme or Right to Buy scheme on the government ‘Own Your Home’ website

There is a lot to think about when you’re buying your first home and it is also beneficial to get some tailored advice from a mortgage adviser when deciding which, if any, of the government schemes are best for you. It may be the case that there is another option to consider when applying for a mortgage and a mortgage adviser can explain all available options to you, enabling you to make an informed decision when purchasing your first home. 

Speaking to a mortgage adviser 

If you’re looking for an independent mortgage expert who can assist you as a first-time buyer, our team at Mortgage Required can help. We are approved help to buy mortgage advisers and we can provide you with step-by-step guidance during the help to buy application process and mortgage application process. You will have your own personal administrator who will keep you updated on the progress of your applications too, preventing any concerns. We pride ourselves on making the process of buying your first home as stress-free as possible. 

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