Across England the government’s Help to Buy Equity Loan scheme, launched in April 2013, has helped support over a quarter of a million households to get onto the housing ladder. From 1 April 2021, Help to Buy will only be available to first-time buyers and new regional price caps will set the maximum value for property purchases eligible under the scheme*.
*Help to Buy applications approved by 15 December 2020 will have until 31 May 2021 to complete under the original scheme. For general information only. Specialist mortgage advice must always be sought.
Purchasers require a minimum 5% deposit and are eligible for a low-interest government-backed loan of between 5% and 20% of the value of a new-build home (up to 40% of the value if purchasing in London). Buyers require a mortgage (75% or less) to cover the remaining amount and the home must be purchased from a homebuilder registered for a Help to Buy Equity Loan.
The loan is interest-free for the first five years; purchasers are required to start paying interest on the loan after this period has elapsed. As the repayments are interests only, it does not reduce the amount owed. It is possible to repay all or part of the loan at any time, however, a part payment must be at least 10% of the value of the property at the time of repayment.
The help to buy ISA is now closed for new accounts. However, if you opened your Help to Buy ISA before 30th November 2019, you will be able to keep saving until November 2029. If you are saving to buy your first home, save money into a Help to Buy ISA, then the Government will boost your savings by 25%. For every £200 you save, receive a government bonus of £50. The maximum government bonus you can receive is £3,000.
This is a brilliant option for getting on the housing ladder for buyers who can’t afford a mortgage on 100% of a home. It gives the opportunity to buy between 25% to 75% of the value of the home. Rent is also due on the remaining share. Further down the line, the buyer is given the opportunity to buy an increased share if they can afford to do so to a maximum share of 100%.
You could buy a home through Help to Buy: Shared Ownership in England if:
With Help to Buy: Shared Ownership you can buy a newly built home or an existing one through resale programmes from housing associations. You’ll need to take out a mortgage to pay for your share of the home’s purchase price, or fund this through your savings. Shared Ownership properties are always leasehold.
Only military personnel will be given priority over other groups through government-funded shared ownership schemes. However, councils with their own shared ownership home-building programmes may have some priority groups, based on local housing needs.
When deciding if an equity loan is right for you, it is important to consider the full cost of your borrowing:
When you take out your equity loan, you agree to repay it in full, plus interest and management fees.
The amount you pay back is worked out as a percentage of the market value at the time you choose to repay.
If the market value of your home rises, so does the amount you owe on your equity loan. And if the value of your home falls, the amount you owe on your equity loan falls too.