Help to Buy and other property purchase schemes

Khaled Ellatif, Associate Solicitor in the Residential Property team at Axiom DWFM solicitors, assesses the government’s latest measures and changes regarding the Help to Buy Scheme.

How does the Help to Buy Scheme work?

In essence, the Help to Buy scheme helps first-time buyers purchase a property with just a 5% deposit, with a borrowing of 20% of the purchase price (or 40% in London) interest-free for five years.

The concept behind the Help to Buy Scheme was that it offers an equity loan where the government lend first-time buyers in England money to buy a newly built home.

By way of illustration, the HTB cap is as follows:

So, if you were to buy a home for £200,000.00, it would work out as:

  • Your deposit: 5% – £10,000.00.
  • Equity loan: 20% – £40,000.00.
  • Mortgage: 75% – £150,000.00.

Total: £200,000.00.

Scheme is ending and the end of March 2023

The Help to Buy Equity Loan comes to an end on the 31st March 2023 and all new applications on the 31st October 2022. So, to be eligible for an equity loan, you must legally complete by 31st March 2023 and you would be expected to have your keys to your new home by 6:00 pm.

Your homebuilder must have finished building your homes so it’s ready to live in by 31st December 2022, this is called ‘’practical completion.’’ When your home is built it will receive a new-home warranty.

What happens if the property isn’t finished in time?

In the event that your homebuilder cannot finish your home in time, your homebuilder must return your reservation fee to you in full.

If you have exchanged, your homebuilder must unconditionally release you from the contract and return your deposit.

What are the alternatives to Help to Buy?

Whilst there is currently no direct replacement to the HTB scheme, the government has introduced the replacement of the HTB ISA with the Lifetime ISA, which offers account holders the potential of a 25% bonus on their savings, with up to £1,000.00 payable every year for up to 32 years.

What is the First Homes Scheme?

This scheme offers new homes discounted to at least 30% compared to market value for first-time buyers. The discount is then passed on to future sales. However, there are conditions around the maximum value of the Property (£250,000.00 outside of London or £420,000.00 in London) and it is important to note that the annual household income of the buyers needs to be below £90,000.00.

How does Shared Ownership work?

Another Alternative to the HTB scheme for prospective buyers is the Shared Ownership scheme. This will allow buyers to purchase a share of a property and rent the remaining share of the property from a landlord or housing association. As a part-owner, you would only pay mortgage for the part of the property which you will own, which naturally means also that there will be a lower deposit.

However, it is important to note that you can increase the share of your property over time, though as aspect called ‘’staircasing.’’ Staircasing can be seen in two ways:

  • Interim staircasing – this is the purchase of a share which increases the amount owned by you, but not 100%. For example, from 50% to 75% (with the reduction of the rent paid to the housing association).
  • Final staircasing – the process of buying final shares will take you to 100% ownership of the property and hence the property will no longer be a shared ownership.

Whilst a reliable scheme is currently on the brink of ending, there are alternatives for those who are first time buyers. If you are currently utilising the HTB scheme and needs assistance to push though your matter, do contact us.

Alternatively, if you wish to pursue other methods of assistance, we can also assist with various options.

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