A new version of the Help to Buy Scheme is set to launch in the coming months, while buyers using the existing scheme have been given longer to complete transactions that have been disrupted by the Coronavirus crisis.
The deadline for the completion of the homes themselves will move from 31 December 2020 to 28 February 2021, while the deadline for legal completion of the purchase remains 31 March 2021.
However, homebuyers who reserved their new-build property by 30 June 2020 and have had their purchases delayed severely will have an extension until 31 May 2021 to reach legal completion, as long as the builder can finish the home by 30 April 2021.
The current scheme is open to all homebuyers with deposits of at least five per cent who purchase a new-build property and offers a Government loan of 20 per cent – 40 per cent in London – of the purchase price, capped at £120,000 or £240,000 in London.
That loan is interest-free for the first five years and no repayments are required until year six. The loan is then subject to interest of 1.75 per cent, rising each year by the Retail Prices Index (RPI), plus one per cent.
The borrower must then repay the loan after 25 years or on the sale of the property at the same proportion of the market value that the loan was worth on purchase.
This means that if a homeowner borrowed 20 per cent of the purchase price from Help to Buy, they will need to repay 20 per cent of the sale price on the sale of the property, even if that is significantly higher than the amount borrowed.
The new Help to Buy Scheme, which is expected to launch this month for applications and which will be open until 2023, will only be open to first-time buyers.
Like the existing scheme, it will offer a loan of 20 per cent or 40 per cent in London and the amount repaid will be tied to a proportion of the market value of the home at the point of sale.
However, the new scheme will introduce a new system of regional price caps:
Region Price cap for Help to Buy homes April 2021 to March 2023
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
South East £437,600
South West £349,000
Buyers must have at least a five per cent deposit to be eligible for Help to Buy. If you need assistance with Help to Buy, please contact our residential conveyancing department.