Written by Ruth Collett, Conveyancing Executive at Spire Solicitors LLP.
On the 31st July 2020, the government announced a two-month extension to the current Help to Buy equity loan scheme, to assist with delays to housebuilding as a result of Covid-19.
Under the scheme, which was being removed in March next year, new homes were required to complete by the end of December for buyers to qualify for the government support. However, as construction was delayed as a result of lockdown, around 18,000 property transactions were expected to be at risk of collapsing.
The scheme has now been extended to the end of February 2021, with legal completions required by the end of March 2021, although some extensions will be granted allowing some completions to take place by May 2021.
Help to Buy was introduced in April 2013 and official figures show 273,000 properties have been bought using the scheme. It is set to replaced from April 2021 with a new Help to Buy scheme which will only be available to first time buyers. This is scheduled to run for two years until March 2023 and regional price caps will be applied to restrict the number of eligible properties.
As with the current scheme, under the new scheme, the government will lend buyers up to 20% of the cost of a newly built home, and up to 40% in London. The minimum deposit required by the buyer will be 5% with 75% mortgage and 20% Help to Buy Equity Loan.
Interest on the loan is not charged until year six and you can pay back part or all the loan at any time. However, you will have to pay back the equity loan when you sell your home or at the end of your mortgage term- whichever comes first. The amount you pay back will also depend on the market value of your home. When the property is sold, the Homes and Communities Agency (HCA) who administer these mortgages will take 20% of the sale price
This is brief overview of the Help to Buy equity loan. For more information, please call our Norwich office on 01603 677077 for all your legal needs.