Equity Loan scheme open to first-time buyers
A new Help to Buy: Equity Loan scheme opens to first-time buyers, this will be available for two-years from 1 April 2021. The Help to Buy scheme will end on 31 March 2023.
Help to Buy: Equity Loan is a loan from the government that you put towards the cost of buying a newly built home. If you are a first-time buyer and you are eligible for an equity loan, can borrow up to 20% (40% in London) of the purchase price of a new build home.
If you are eligible for the Help to Buy: Equity Loan scheme and it’s right for you, when searching for a property, you can only apply if you reserve your new home with a Help to Buy registered homebuilder.
Who is eligible?
If you are considering taking advantage of the scheme, you will need to meet the following requirements:
You must be able to pay the monthly fee and interest payments
You must not own another property or plan to enter a part exchange on your old house.
You must not rent or sublet the property once purchased
It’s important to consider if the Help to Buy: Equity Loan will be suitable for you. You may already have a deposit to secure a mortgage and may not need to take advantage, if you are unsure, you can get in touch with us and we can discuss the options that are right for you
This scheme applies in England only. Scotland, Wales and Northern Ireland have similar schemes available - you can find more information below:
How does it work?
An equity loan is secured against your property in the same way a repayment mortgage is. The Help to Buy: Equity Loan scheme is not regulated by the Financial Conduct Authority (FCA).
Help to Buy: Equity Loan is provided by the Homes and Communities Agency, (trading as Homes England), they are government run and funded by Ministry of Housing.
The agency can lend you a minimum of 5%, and up to 20%, of the market value of your new built home. If you are looking to buy a property in London, you could be eligible for up to 40%.
The amount you can spend on a property, depends on the location. Below are the Equity Loan price caps starting April 2021 to March 2023.
Region
Maximum Property Price
North East: £186,100
North West: £224,400
Yorkshire and the Humber: £228,100
East Midlands: £261,900
West Midlands: £255,600
East of England: £407,40
London: £600,000
South East: £437,600
South West: £349,000
The maximum property price is the full purchase price, this can’t be changed or negotiated. Your homebuilder will be able to confirm if the home you want to buy is within the right price range.
When buying a property through the scheme you must do the following:
Pay a deposit of 5% of the purchase price at exchange of contracts
Arrange a repayment mortgage of at least 25% of the purchase price of your new home.
What to expect.
In the first 5 years:
The equity loan is interest free
You will pay a £1 monthly management fee by Direct Debit.
From year 6 onwards:
You will pay the £1 monthly management fee
You will pay a monthly interest fee of 1.75% of the equity loan
The interest fees will rise each year in April by the Consumer Price Index (CPI), plus 2%
You will continue to pay interest until you repay your loan in full.
You must repay the equity loan when you pay off your mortgage, sell your home or reach the end of your loan term (normally 25 years). You can pay off your equity loan in full at any time before then or make part payments. Your first part repayment will need to be at least 10% of what your home is worth at that time.
How to apply
You must reserve your home with the house builder and pay the fee which should be no more than £500.
After you’ve reserved your home, contact a Help to Buy agent who will check if you can afford the equity loan and will help you to apply. They are appointed by the government and will guide you through your purchase.
If you are seeking help to get your mortgage arranged, you can fill in the form below to get in touch with us. We are here to support you in the best way we can and find the right mortgage that suits you.
