The latest iteration of the Help to Buy scheme was launched on 16th December 2020, with a focus on ensuring first time buyers have the opportunity to get on the property ladder.
Over 250,000 properties were sold under the previous Help to Buy scheme, with anyone who reserved on or after 16th December being able to take advantage of the new scheme giving them the ability to pick up the keys for their new home from April 1st 2021.
There are some changes that come with the new scheme which buyers should be aware of. Below we outline some of the key changes and FAQs. Our New Homes sales teams would be delighted to answer any other questions you may have about Help to Buy and how you could benefit from the scheme.
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Help to Buy Changes
What are the main changes in the new Help to Buy scheme?
There are five main changes with the new Help to Buy scheme:
Regional price caps will be in place instead of a cap of £600,000 across the country. The price caps are the maximum value a property can be in order to qualify for the Help to Buy scheme. These new price caps are:
- In London the price cap remains at £600,000
- South-East England price caps will change to £437,600
- East of England price caps will change to £407,400
You can view the full list of regional price caps here: here
All purchasers involved must not currently, or have ever, owned a home or land either in the UK or abroad. This is a change from the previous scheme where purchasers may have owned a home in the past.
All Help to Buy homebuilders must have agreed to sign up to the New Homes Ombudsman. This Ombudsman supports buyers in resolving, or being compensated for, poor building work and enforces higher building standards. This Ombudsman scheme is launching in 2021.
Homebuilders are not allowed to charge ground rent on new Help to Buy homes.
Interest paid on the loan in Year 6 has changed from RPI plus 1% to CPI plus 2%.
What is the difference between Help to Buy and Help to Buy London?
Help to Buy London give a maximum of 40% equity loan and is only applicable in the 32 London Boroughs, for everywhere else it is a maximum of 20% equity loan.
Financing my purchase
How much do I pay for the loan?
There are two payments due for the Help to Buy equity loan; a management fee of £1 per month for duration of the loan, and interest payments. There is no interest paid for the first five years of the equity loan, after that there is an interest payment of 1.75% of the amount of your equity loan at the time you purchased your property, rising annually from the fifth anniversary of your equity loan by the increase (if any) in CPI (the consumer price index) plus 2% for a maximum time period of 25 years.
What is the minimum and maximum deposit that I can put in?
The minimum deposit which can be used for the Help to Buy equity loan scheme is 5%. With a maximum equity loan of 40%, as is the case for buyers in London, the maximum deposit a buyer could use is 35% because the minimum LTV mortgage available on Help to Buy properties is 25% of the purchase price.
Can I reduce the equity loan by paying it off early?
Yes, you can choose to pay a minimum of 10% of the loan off in one go, at any time, this is known as ‘staircasing’. The repayment for this will be based on a RICS qualified surveyor’s current valuation of the property. The property owner will pay the cost of the survey and the administration of the staircasing or repayment.
What happens if the flat goes up / down in value?
The equity loan will remain a percentage of the property value as long as you have complied with all obligations in the Help to Buy mortgage deed.
For full details on financing your Help to Buy purchase please speak to a Help to Buy approved mortgage broker, such as Alexander Hall who will be able to assess your eligibility for the scheme and answer any further questions.
Buying, letting and selling my Help to Buy flat
What is the difference between HTB and shared ownership?
The main difference is that for the first 5 years with HTB, you will only pay £1 per month on the Government’s equity loan. For Shared Ownerships you will be paying a subsidised rent for the percentage of the property that you didn’t buy, essentially making HTB more affordable. This will be in addition to the mortgage payments on the remainder in both Shared Ownership & HTB properties.
Is Help to Buy available for every new development?
No. The developer must apply to Homes England to become part of the scheme. The Developer must be a UK based company and provide a 10 Year Building Warranty.
Can I buy off plan?
Yes. When the estimated completion date will be a maximum of six months from the point of exchange.
Can I rent the property out?
No. The scheme is designed purely for Owner Occupiers.
Can I rent out a bedroom?
Yes. You may rent out a spare room as long as you live in the property as well.
Can I sell the property at any time?
Yes but be aware that the HTB equity loan will need to be repaid within 25 years.
What happens when I sell?
When you sell your property you will repay your mortgage and the Help to Buy loan. All remaining equity in the property is yours.
What are the implications if I sell within the first five years?
The only implications will be a redemption penalty, if you have one, on your mortgage.
Why are the monthly payments so low on this type of purchase?
This is because the mortgage will be a maximum (if you take the full 40% loan) of 55% LTV which will secure some of the best mortgage rates in the market place.
Can I have someone on the mortgage and Help to Buy application if they aren’t going to live in the property?
No. Unlike with some other mortgages, the people on the mortgage and the Help to Buy application must live in the property.
Can I own a Help to Buy home and buy a second home?
No. If you can afford to purchase another home you will have to repay the Help to Buy equity loan. The property purchased must be your only residence. Help to Buy is not available to assist buy-to-let investors.
What does ATP, ATE, PIF, CTP, Form 1 and Form 2 mean when looking at my Help to Buy application?
ATP – Authority to Proceed: This is given to the purchaser, purchaser’s solicitor and developer from the Help to Buy Agency. Your lawyer will not get a contract unless you have Authority to Proceed.
ATE – Authority to Exchange: This is secured from Help to Buy agency confirming receipt of Form 1 plus supporting documents and allows exchange of contracts to take place.
PIF – Property Information Form: This is the form that the buyer, agent and broker need to fill out at the start of the deal to secure the Authority to Proceed.
CTP – Confirmation to Provider: This document confirms receipt of Form 2 and allows completion to proceed.
Solicitors Form 1: The document that the lawyer will send to Help to Buy to confirm that they have carried out all of the legal work in accordance with the Help to Buy guidelines and reconfirms the details and disclosures of the purchase. This document secures the Authority to Exchange.
Solicitors Form 2: The document that the lawyer sends to Help to Buy ahead of completion to secure the release of the equity funds. This document secures the Confirmation to Provider.
To begin your journey to owning your own home using the Help to Buy scheme, contact us today, contact us today or explore all properties explore all properties we currently have available using the scheme.
To find out your eligibility for Help to Buy, we recommend speaking to a Help to Buy specialist broker at Alexander Hall.