Help to Buy scheme for new-build homes gets underway

First-time buyers interested in new-build homes can now apply for the new Help to Buy: Equity Loan scheme.

With a Help to Buy: Equity Loan, the government lends homebuyers up to 20% (40% in London) of the cost of a newly built home. Customers pay a deposit of 5% or more and arrange a mortgage of 25% or more to make up the rest. The equity loan is interest-free for the first five years.

Eligible first-time buyers can reserve their homes from mid-December and get the keys to move in from 1 April 2021.

Help to Buy (2021-2023) has regional price limits, set at 1.5 times the average first-time buyer price in each region in England. This keeps the prices of new homes closer to the average regional first-time buyer property prices, reducing the amount that first-time buyers need to borrow.

Help to Buy homebuilders must agree to follow the Consumer Code for homebuilders, the New Homes Ombudsman, the Building Safety Charter and fulfil planning permissions and building regulations.

Homes England provided these further details and figures. 

Help to Buy: Equity Loan (2021-2023), England

First-time homebuyers who meet affordability and lending terms can borrow an equity loan of up to 20% (40% in London) of the sale price of a new build home.

How much you can spend on your home will depend on which region it is in. 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 £407,400; London £600,000; South East £437,600; South West £349,000.

You must fund at least 80% (60% in London) of the sale price with a mortgage and at least a 5% deposit.

Pay no interest on the loan for the first 5 years. Interest fees start at 1.75% and rise each year in April by the Consumer Prices Index including owner occupiers’ housing costs (CPIH) plus 2%.

You pay a monthly management fee of £1 for the life of the loan. Homes England, the lender, secures the equity loan as a second charge on your Help to Buy home. You must repay the equity loan when you sell the home, pay off your mortgage or reach the end of your loan term. But you can repay all or part (10% at a time, or if you have a 40% loan, 20% or 30%) of the loan any time before then. 

An independent financial adviser and a solicitor may be able to help you decide if Help to Buy is right for you.

Homebuyers interested in Help to Buy: Equity Loan (2021-2023) are encouraged to read the recently published homebuyers guide to know how the scheme works and how to apply.

Please contact Jackie Hand if you would like advice about the legal aspects of buying or selling a home.