The Government’s popular Help to Buy scheme is officially coming to an end in March 2023.
With an estimated third of a million households taking advantage of the equity loan scheme since its launch nearly a decade ago, Help to Buy has been a lifeline to so many looking to take their first steps onto the property ladder.
Coming to an end two months earlier than expected, applicants wanting to use the scheme will now have to reserve a property by 6pm on 31st October 2022, with the purchase needing to be complete by a deadline of 31st March 2023.
What is the Help to Buy scheme?
Available to first-time buyers, the scheme offers an equity loan of up to 20% toward the cost of a new-build home. Buyers would then need to provide a minimum of 5% deposit and obtain a mortgage for the remaining 75% in order to purchase the property.
However, buyers are required to pay interest on the 20% equity loan to the government after five years, at a rate of 1.75%, so it is worth keeping this in mind when looking at your repayment costs.
And importantly, what buyers need to repay the government is based on the house price – not how much was borrowed. So, if the house price has increased, so has the repayment cost.
Who is eligible for Help to Buy?
In England, to be eligible for the Help to Buy scheme you must be:
Aged 18 or over.
A first-time buyer.
Able to afford the fees and repayments.
Able to provide a 5% cash deposit on the property.
To be eligible under the Help to Buy scheme, the property must be:
A new-build home that will be your main residence.
Sold by a Help to Buy registered homebuilder.
The only property that you own and live in.
What alternatives are out there now the scheme is coming to an end?
With Help to Buy coming to an end, many will be looking for other schemes that are available to help them buy a property. Here are some potential alternatives worth considering:
Mortgage Guarantee Scheme – The mortgage guarantee scheme was launched in April 2021 to help homebuyers with small deposits to get on, or up, the property ladder. Participating lenders are offering 95% loan-to-value mortgages under a guarantee from the government. This means buyers will only have to put down a 5% deposit for mortgage products available under the scheme.
Lifetime ISA – First-time buyers (aged between 18 and 40) saving for a house deposit can use a Lifetime ISA. Savers can pay in up to £4,000 a year and will receive a 25% bonus from the government on any money they pay in, up to £1,000 a year. The money can only be withdrawn to buy a first home or for retirement once the saver has turned 60.
First Homes – The First Homes initiative allows buyers to purchase a new-build home at a 30-50% discount to its market value. When the property is sold at a later date, the discount is also passed on to the next buyer. There are conditions involved with the scheme and you can find out more here.
Shared Ownership – Another alternative to Help to Buy for prospective buyers is Shared Ownership, a government scheme that allows people to purchase a share of a property (between 10% and 75%) and pay rent on the rest. As a part-owner the required deposit and mortgage payments are significantly lower. When you can afford to do so, you can buy more shares in your home to own more of the property and pay less rent, in a process known as ‘staircasing’.
To find out if you can buy a home with any of the above options, please contact our independent mortgage advisor, Ashwell Mortgage Services. They are ideally placed to help you understand what you can afford, and which scheme is in your best interests.
With the Help to Buy deadline fast approaching, the number of homes offering Help to Buy is decreasing rapidly. The final deadline to reserve a new home, by which you need to apply for the Help to Buy scheme is 6pm on 31st October 2022. We highly recommend anyone looking to take advantage of the scheme to act quickly to avoid disappointment.
Our Land and New Homes team are on hand to guide you through the process of buying your first home. Contact the team today to discuss your options.
