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Help to Buy equity loan scheme extended to 31 May and new scheme set to start

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The Help to Buy: Equity Loan scheme deadline has been extended by an additional two months until the end of May 2021, the government has announced. More than 16,000 purchases were at risk of falling through due to delays caused by the Covid-19 pandemic, leaving buyers with huge bills but no home to show for it.

The government states that the extension will allow homebuilders to finish building and buyers two extra months to complete their purchase and get the keys to their new home. However, some buyers are still worried that the extension will not be enough.

For first time buyers currently not on the Help to Buy: Equity Loan scheme, applications for the 2013-2021 scheme closed on 15 December 2020. However, new buyers can take advantage of the new 2021-2023 Equity Loan scheme.

What is the Help to Buy equity loan scheme?

Help to Buy is a government scheme designed to help first time buyers (and people who used to own property but cannot afford to anymore) get on the housing ladder.

Under the Help to Buy: Equity Loan scheme, the government provides a 20% loan (or 40% in London) to put towards the purchase price of a new build home. The buyer must put in a minimum of 5% and get a mortgage on the rest.

There are two Equity Loan schemes, which are currently overlapping. The main difference between the schemes is that under the new one, there are regional price caps on the maximum purchase price of the new home.

Applications for the 2013-21 Help to Buy: Equity Loan scheme closed on 15 December 2020. The new Equity Loan scheme is due to start on 1 April 2021, but applications opened on 15 December 2020.

Deadline extended for the third time

The Covid-19 pandemic has battered the housing market over the past year on both the house building and conveyancing sides. House builders have faced considerable delays, from workers having to go into self-isolation to a shortage of materials. The government therefore extended the deadline twice in 2020 to account for the disruption.

Despite the extensions, a BBC Freedom of Information request revealed that, at the end of January 2021, 16,691 Help to Buy transactions were still waiting to complete under the current scheme. With the scheme due to end on 31 March, buyers who did not make the deadline were at risk of losing thousands of pounds.

On 11 February 2021, the government announced that it would extend the deadline for the third time by a further two months until 31 May 2021 – but this will be the last extension.

Many are still worried that the extension will not allow them to complete in time to receive the equity loan.

What happens if you cannot meet the new deadline?

If you cannot complete by 31 May 2021, your homebuilder must unconditionally release you from your contract.

Your homebuilder must refund your reservation fee, but may be able to make deductions if you have already received Authority to Proceed. The homebuilder must also return your deposit if you have exchanged contracts. Your conveyancing solicitor can provide further advice about what this means for you.

Unfortunately, you may be required to bear your own costs of legal and financial advice.

New Help to Buy equity loan scheme already open to new applicants

Applications for the new 2021-2023 Equity Loan scheme opened on 15 December 2020. So, if you have just started looking for or thinking about buying your first home, this is the scheme you will use.

Under the new scheme, the maximum purchase price of the property depends on where in the UK it is. In London, the maximum price is £600,000, but in the North East, the maximum is £186,000. These caps are meant to better reflect typical house prices in the area in which you are buying.

To be eligible for the scheme, you must be a first time buyer. You and anyone you are buying with cannot own your own home, now or in the past, in the UK or abroad. This includes if you inherited property.

How to apply for the Help to Buy: Equity Loan Scheme 2021-2023

  1. Find and reserve your home

Homebuilders will advertise eligible homes just like any other home. When you reserve your home, you will pay a reservation fee which cannot be more than £500. If you do not exchange contracts, this fee is refundable.

  1. Get independent financial advice

It is worth speaking to an independent financial advisor or obtain some kind of financial advice to check whether getting an equity loan is right for you and that you can afford it.

  1. Find a Help to Buy agent

Your Help to Buy agent will help you apply for the scheme if you are eligible. You can use the Help to Buy website to find your local Help to Buy agent.

Once your equity loan is approved and you get Authority to Proceed, your agent will give your solicitor and homebuilder the go ahead to proceed with the transaction. Authority to Proceed is only valid for three months so moving quickly is a must.

  1. Apply for your mortgage

You can do this once you have Authority to Proceed.

  1. Instruct a conveyancing solicitor

 Your solicitor will handle all the legal aspects of the process, including:

  • Filling out the relevant legal documentation.
  • Talking you through the contract and your legal obligations.
  • Checking important details, such as whether the property price and deposit match the amounts set out in the Authority to Proceed.
  • Handling exchange of contracts and completion.
  • Registering your ownership with HM Land Registry.

Are you looking to buy a new build home?

At Bird & Co, we are a specialist firm of conveyancing solicitors who help people across the UK buy and sell their homes.

Our Help to Buy solicitors are experienced with handling Help to Buy purchases and can help you progress your purchase as swiftly as possible.

Get a conveyancing quote online to see how much your transaction is likely to cost, then a member of our conveyancing team will be in touch shortly.