New Help to Buy Scheme Launches for First Time Buyers
As of 16th December 2020, first time buyers are able to apply for the new Help to Buy scheme in England. The new version of Help to Buy has some parallels with the previous scheme, but also some significant differences.
Here, Claire Egerton looks at the new rules and how buyers can take advantage of the scheme.
What rules apply under the new Help to Buy scheme?
One of the most important rules under the new scheme is that only first-time buyers are able to utilise it, meaning those who have owned property before will not be eligible.
A further difference is that regional price caps will be introduced in order to limit how much developers can charge for homes sold under the scheme. This cap is set at 1.5 times the average property value in the region, meaning that in the North West, the price cap will be set at £224,400.
The new scheme may be open to first time buyers for applications, however, properties being purchased won’t be able to complete until 1st April 2021. At the same time, applications for the previous Help to Buy scheme are now closed to new applicants, although those with transactions already in the pipeline will still be able to obtain their equity loan. The new scheme will remain in place until 2023.
What else do I need to know?
As with the previous Help to Buy scheme, buyers under the 2021-23 scheme will be able to borrow up to 20% of a new-build property’s value (or 40% in London) in the form of an equity loan from the government. Buyers will need to raise a deposit of at least 5% of the property’s value, with the remainder of the purchase price coming from a mortgage, which must be a repayment mortgage that is valid for the duration of the equity loan. A reservation fee of £500 on the buyer’s chosen property will be applicable, as well as other costs associated with moving.
First time buyers do not have to pay stamp duty on the first £300,000, so depending on the region in which you are buying, you may or may not need to factor in Stamp Duty costs.
Whilst Help to Buy has proven popular with those trying to get on the property ladder, tighter eligibility criteria and restrictions on the value of properties that can be purchased may limit the suitability of the new loan scheme.
As a government scheme, there are more hoops to jump through than with a normal property purchase and choosing a solicitor that has experience of working with the Help to Buy scheme and regularly acts for those buying new build properties can be helpful in providing a smooth purchase.
For more information about the new Help to Buy scheme or to obtain a quote from our conveyancing team in relation to a property purchase, please get in touch.
Claire Egerton is Head of Residential Property at O’Donnell Solicitors.
For any further advice, please contact Claire on 01457 761320 or email firstname.lastname@example.org.