Help to Buy Equity Loan: The Revised Scheme 2021 - 2023

As of April 1st 2021 the first legal completions can take place on the revised Government Help to Buy Equity Loan Scheme. Navigating through the fine print can be a challenge, so we’ve done it for you to bring you an up-to-date guide of everything you need to know to make a decision on whether the scheme is right for you. 

In short, the Help to Buy Equity Loan is a loan from the Government for First Time Buyers to help towards the cost of buying a new build home. It’s important to stress that this only applies to NEW BUILD properties.

MS
Manning Stainton

How does the scheme work?

Horsforth

Dependent on the price of your home, the Government will lend you a percentage of your intended new build property, this will be used alongside your deposit and mortgage to assist your purchase.

How much can I borrow?

Horsforth

The minimum you can borrow from the Government is 5% of the price of your home and the maximum you can borrow is 20% of the full purchase price of a new build home. If you’re living in London the maximum you can borrow is 40% of the full purchase price.

Who is eligible?

Horsforth

The changes to the scheme mean it is only accessible to First Time Buyers. Therefore, you or the person you are purchasing with cannot have previously owned a property.

How do I know if the property is eligible?

Horsforth

To be eligible for the Help to Buy Equity loan you must buy your new home from a homebuilder that is registered for the Help to Buy: Equity Loan scheme.

Is there a price cap on the properties that are eligible?

Horsforth

The price cap on the property price varies on where in the country you are purchasing your property. See a full list below.

North East                  £186,100
North West                 £224,400
Yorkshire                    £228,100
East Midlands            £261,900
West Midlands           £255,600
East of England         £407,400
London                      £600,000
South East                £437,600
South West               £349,000

How does the Equity Loan work in relation to my deposit and mortgage?

Horsforth

When buying your home, homebuyers are required to pay a minimum of a 5% deposit, your Equity loan will then be an additional percentage of the property. The remaining amount will be made up by your mortgage. 

Do I pay interest on my Equity Loan?

Horsforth

For the first 5 years the Equity Loan is interest free but you will pay a £1 monthly management fee by Direct Debit. After 5 years, the interest on the loan increases to 1.75% of the loan value. From then the interest rate will rise each year in April by the Consumer Price Index plus 2%. You will continue to pay interest until you repay the loan in full.

When must I repay the Equity Loan by?

Horsforth

The Equity loan must be repaid for a number of reasons. Firstly, at the end of the equity loan term, or when you pay off your repayment mortgage. The Equity Loan must also be paid back when you come to selling your home. Finally, if you do not follow the terms set out in the Equity Loan contract you will be asked to repay the loan in full.

How much do I pay back?

Horsforth

The amount you pay back for your loan is dependent on your property price at the time you come to paying back your loan. The repayment amount is based on the percentage of your property value at that current time.

If you would like anymore information on the Help to Buy Equity Scheme, contact our new homes team!