Help to Buy: What is changing in 2021?

Applications now open for new Help to Buy equity loan

Since the Help to Buy equity loan was first introduced in 2013, it has helped more than 270,000 buyers find a home to call their own. Whilst this year has seen a second extension of the current scheme due to delays caused by COVID-19, Homes England have now announced that applications are open for buyers to apply for the new Help to Buy which will be available from April 2021 to 2023.

Applications for the new Help to Buy scheme opened on Wednesday 16th December 2020.

To help you on your homebuying journey, Share to Buy have gathered all of the information you need about the new Help to Buy scheme!

What is the current Help to Buy scheme?

Help to Buy is a home ownership scheme which aims to help first time buyers onto the property ladder in England by providing an equity loan of up to 20% of the value of a new-build home.

As the government provides a loan (also known as shared equity) of up to 20% towards a home, a potential buyer only needs to raise a 5% deposit, with a 75% mortgage making up the rest. This makes the property ladder more accessible for first time buyers who may struggle to raise the large deposits that are usually needed on the open market.

To reflect the higher property prices in London, the equity loan is increased to 40% for homes within the capital, meaning a buyer will need to raise a 5% deposit but will only need to have a 55% mortgage to make up the full value.

For the current equity loan eligibility criteria, please visit our Help to Buy explainer page.

How will Help to Buy change in 2021?

While Help to Buy is currently available to all buyers who do not own another home and are purchasing a new-build property available through the scheme, the revised equity loan will only be open to first time buyers. The government has decided to introduce this change to ensure the scheme is assisting those who will benefit from it the most.

Changes are also being made to building standards with those creating homes having to comply with stricter guidelines, including the Consumer Code for Home Builders and the New Homes Ombudsman, which is due to launch in 2021.

Alongside this, the new Help to Buy product will also enforce regional price limits. This will mean that buyers can only use the initiative to purchase a home costing no more than 1.5 times the average first time buyer property price in their region.

What are the regional price caps for Help to Buy?

The new regional price caps for Help to Buy will be as follows:

  • 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

What is the new eligibility criteria for Help to Buy in 2021?

If you’re hoping to purchase through Help to Buy after the changes to the scheme, there are certain eligibility criteria that you will need to meet:

  • You must be a first time buyer. This means that you cannot already own, or have owned previously, a property or residential land in the UK or abroad.
  • If you are buying a property with another person, you must both meet the definition of a first time buyer to benefit from the scheme.
  • While there is no minimum or maximum income brackets, you must be able to fund at least 80% of the purchase through a combination of deposit and mortgage.

How do I pay back the Help to Buy equity loan?

The Help to Buy equity loan is interest free for five years – you are only required to pay a monthly management charge of £1 during this time. After the five years, the purchaser pays an annual fee of 1.75% on the amount of the outstanding loan; this fee will increase each year with inflation.

You will have to pay back the Help to Buy equity loan when you sell your home or at the end of your mortgage period – whichever comes first. However, you can also pay back some of the equity loan without selling your home; you can pay back either 10% or 20% of the total amount, as long as the loan is worth at least 10% of the value of your home.

What type of home can I purchase through Help to Buy?

The Help to Buy equity loan is available on specific new-build properties where Homes England have a registration agreement with the housebuilder.

The scheme is available on both houses and apartments nationwide meaning that there are a range of properties for budding buyers to choose from, however, you will need to keep the new regional price caps in mind.

How can I apply for the new Help to Buy scheme?

You can begin the search for your first home on the Share to Buy property portal where you can filter properties based off your own requirements and needs – including schemes such as Help to Buy, number of bedrooms and search radius. Each live listing will offer a budget calculator, outlining the minimum deposit required and monthly costs.

Once you have found and viewed a property that you would like to buy, you will need to reserve the home by paying a reservation fee of no more than £500 to the relevant housing provider. This fee will need to be paid before you can apply for the equity loan and, if at this stage you are found to not be eligible for the scheme, the amount will be refunded to you.

Once you have paid your reservation fee and your equity loan is approved, you will be given what is called ‘Authority to Proceed’. This will remain valid for three months and allows you to continue with the home buying process, including applying for a mortgage and appointing a solicitor to assist you with the legal aspects.

Please note that you will need to exchange contracts within three months of receiving the Authority to Proceed, and must complete the purchase of your home within six months of exchanging contracts.

For further questions or for help with your application, your local Help to Buy agent will be able to assist. You can find your local agent on the government website here.

Register with Share to Buy to be kept up to date with all developments regarding first time buyers products and housing options such as Help to Buy and Shared Ownership. You can also start your property search on Share to Buy’s portal today!