The Government has extended its Help to Buy equity loan scheme by two months to help home buyers whose purchases were put on hold due to the coronavirus pandemic.
Under the current scheme, new homes would have needed to have been finished being built by the end of December. The extension will see the deadline move to 28 February 2021. The legal completion date for most home buyers remains as 31 March 2021.
Cautiously welcoming the news, Jo Francis who is a conveyancer working in the Residential Property team at Phillips Solicitors incorporating Brain Chase Coles said: “Delays in construction work caused by the lockdown left many home buyers worried that they would miss the original deadline.”
Where necessary, extensions may be granted for home buyers who have experienced severe delays because of the pandemic and reserved properties before 30 June.
These buyers will get an extension to complete their purchases by 31 May 2021.
According to the Home Builders Federation, an estimated 18,400 sales would have fallen through if the deadline had not been extended.
New Scheme Planned
The current Help to Buy scheme is set to be replaced in April 2021 with a new version which will run until March 2023. Applications for the new scheme can be made from Autumn 2020.
Jo said: “Help to Buy was introduced in April 2013 with the aim of assisting people who could afford the mortgage repayments but could not save enough money for the required deposit. Government figures show more than 270,000 properties have been bought using the scheme.”
The new scheme will introduce property price caps and be restricted to first-time buyers only. Here in the South East, the cap is £437,600, while in London it is £600,000.
The Government will lend buyers up to 20% of the cost of a newly built property. In London this will be up to 40%.
The minimum deposit required by the buyer will be 5% with 75% mortgage and 20% from the Help to Buy Equity Loan.
Interest on the loan is not charged until the sixth year, when interest fees are charged at 1.75%. This will rise each year, in line with the retail price index inflation rate plus 2%. You pay a monthly management fee of £1.00 for the life of the loan. You can pay back all or 10% chunks of the loan at any time.
“You must repay the equity loan when you come to sell your home, pay off your mortgage or reach the end of your loan term. This is when the Homes and Communities Agency (HCA) who administer these mortgages, will take 20% of the sale price, bearing in mind the amount you pay back will depend on the market value of the property,” said Jo.
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This article is current at the date of publication set out above and is for reference purposes only. It does not constitute legal advice and should not be relied on as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.