First-time buyers have just a few weeks left to take advantage of a government scheme that helps you buy your own house. With the difficulties facing first-time buyers these days, from increased house prices to soaring interest rates, new homeowners often need all the financial help that they can get.
The Help to Buy equity loan is a government scheme that helps first-time buyers get a property with just a five percent deposit by borrowing 20 percent of the purchase price, or 40 percent in London, interest-free for five years. The aim is to help people get onto the property ladder quicker or be able to afford a more expensive house.
In October 2018, the government announced that the scheme, which applies to buying new build homes only, would run from April 1, 2021 to March 31, 2023, which means those who have applied have less than a month left to make the most out of the loan.
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First-time buyers who applied for the Help to Buy equity loan must have completed the purchase on their newly built home by March 31, 2023.
This means that if you applied to the scheme by 6pm on October 31, your application will still be processed, but you must complete the purchase of your home, meaning you legally own it and have the keys to your home, by 6pm on March 31.
Your homebuilder must have finished building your home on or before 17 March 2023 so it’s ready to live in. If your builder cannot finish your home in time, they must return your reservation fee to you in full.
You are eligible to take advantage of the scheme if you have already applied and you are a first-time buyer who is 18 or over. You also need to be able to afford the fees and interest payment that come with using the equity loan.
The Gov.uk website explains: "During the term of the equity loan you only pay interest on the amount you borrowed. You do not pay off any of the loan itself. But you can choose to pay all or part of it off at any time.
"If you sell your home, you will need to pay off all of your equity loan."
First-time buyers can only use the equity loan on a new build home from any of the homebuilders registered with the Help to Buy scheme.
A new build includes converted commercial premises and conversions of buildings which have never been used as homes. It must also be the only home you own and live in, and it must not have been lived in by anyone before you buy it.
The amount you pay for a home depends on where in England you buy it as there is a 'maximum property purchase price' limit for each region.
First-time buyers in the north west can use the scheme to buy a home up to and including the value of £224,400.
Gov.uk explains: "To use the loan you’ll need to pay a minimum deposit of 5 percent of the property purchase price and arrange a repayment mortgage of at least 25% of the property purchase price.
"You can then borrow an equity loan to cover from 5 percent and up to 20 percent of the property purchase price of your newly built home. If the property is in London, you can borrow up to percent.
"The equity loan percentage you borrow is used to calculate your interest and equity loan repayments.
For example, borrowing an equity loan of 20 percent on a property worth £200,000 means you will borrow £40,000. "
You do not have to pay interest for the first five years of the loan but in the sixth year you’ll be charged interest at a rate of 1.75%.
This will be applied to the equity loan amount you originally borrowed and this annual interest is spread over the year in monthly payments.
There are no plans to extend or replace Help to Buy: Equity Loan.
You can find information on other government home ownership schemes available on www.OwnYourHome.gov.uk.
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