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Help to Buy: Exploring the Differences between the Current and New Equity Loan Scheme

The Help to Buy Equity Loan Scheme, an initiative designed to better enable buyers to raise funds for a new residential property purchase, was first announced by the UK Government in the March 2013 Budget. Read more...

The Help to Buy Equity Loan Scheme, an initiative designed to better enable buyers to raise funds for a new residential property purchase, was first announced by the UK Government in the March 2013 Budget.

The scheme offers buyers up to a 20% equity loan towards their purchase, or 40% if the property is in London, which is funded by Homes England. This means that buyers are only required to raise a minimum of 5% of the property value as a cash deposit, and 75% (or 55% in London) by way of a mortgage.

After 8 successful years, the current scheme will be coming to an end on 31st March 2021. It will be replaced by an entirely new Help to Buy Scheme, with stricter eligibility requirements, running from 1st April 2021 to 31st March 2023.

Help to Buy: Equity Loan Scheme 2013 – 2021

Under the current scheme, anybody in the UK can apply to receive a Help to Buy Equity Loan, so long as the following eligibility criteria are met:

  • The property being purchased is a new-build home
  • The property must have reached Practical Completion by 28th February 2021 (extended from 31st December due to delays in construction caused by coronavirus)
  • The property value is less than £600,000
  • The property must be the applicant’s only current property
  • Legal completion must occur by 31st May 2021 (recently extended from the original deadline of 31st March 2021)

Help to Buy: Equity Loan Scheme 2021 – 2023

The 2021 – 2023 Help to Buy Equity Loan will see two key changes to the previous scheme.

Firstly, all applicants to the new scheme must be first-time buyers. Furthermore, applicants who are married or in a civil partnership must make a joint application and both parties must be first-time buyers.

In the current scheme, there is no limitation on the number of properties previously owned so long as they are not owned at the time of purchase. This stricter requirement will see a notable reduction in the number of eligible prospective purchasers.

Secondly, the new scheme will bring the introduction of regional value caps across the country. Previously, the maximum property value was £600,000 no matter where the property was purchased. From 1st April 2021, only London will have a value cap of £600,000, with other regions having substantially lower thresholds; for example, £349,000 in the South West and £186,100 in the North East.

The amount of equity loan available will remain unchanged, with eligible purchasers able to borrow up to 20% of the purchase price, or 40% in London, with a 5% deposit.

What Will Happen Beyond 31st March 2023?

When it comes to the question of whether a similar scheme will be put in place after 2023, Housing Secretary Robert Jenrick has said that ‘all options are on the table.’ So far, no further schemes have been announced and the current intention is for the Help to Buy Equity Loan Scheme to come to an end on 31st March 2023 without extension.

If you are considering taking advantage of the 2021-2023 Help to Buy Equity Loan Scheme to buy your first home and have any questions, please feel free to get in touch with our Real Estate team.

If you would like to discuss any of the topics raised in the above article, please call us on +44 (0)20 7936 8888, email on enquiries@lawstep.co.uk or contact a member of the team below.