How to secure a Help to Buy equity loan ahead of deadline

With the Help to Buy equity loan deadline on the 31st of October fast approaching, Claire Flynn, mortgage expert from money.co.uk has provided her top tips on how to secure a Help to Buy equity loan before applications close.

“A Help to Buy equity loan is a government-led scheme to help first-time buyers buy a new-build home. The main aim of this scheme is to help first-time buyers get onto the property market. If you’re eligible for this scheme you can borrow up to 40% of the market value of a new-build property in London, or 20% of the market value outside of London. The maximum property price available to purchase also varies between regions. The equity loan is used alongside a deposit and mortgage (of at least 25% of the property purchase price) to cover the cost of buying a new-build property.

“If you’re planning to purchase a new build before the 31st of March 2023 and plan to use a Help to Buy equity loan towards the cost, you must apply before applications close on October 31st 2022 in England. To take advantage of the scheme, you must reserve your home and have met with the homebuilder before 6pm on October 31st 2022. The home must have reached practical completion and have received a new-home warranty by December 31st 2022. You must also have received the keys to your new home by 6pm on March 31st 2023 to stay eligible for the equity loan.

“The application process for the Help to Buy equity loan itself is fairly straightforward. Firstly, you’ll need to reserve a new build property with a builder registered with the scheme. You can then apply online through a Help to Buy agent in your region. You will be asked to fill in a Property Information Form so you can give your financial information, as well as your personal details. Once given Authority to Proceed you can then apply for a mortgage and progress your application to the exchange of contracts.

“The equity loan must be paid back in full at the end of the loan term, or when you pay off your mortgage or sell your home. You’re able to repay part or all of your equity loan at any time, but you’ll need to get a market valuation report from a chartered surveyor when you make a repayment. Repayments are based on your equity loan percentage and the market value of your home at the time of repayment. Be mindful that in the sixth year of your loan you will begin paying interest. This means that part payments often reduce the amount you owe, however, any part payment you decide to make must be at least 10% of the market value of your property at that point in time.

“If you’re planning on buying a house after Help to Buy applications close, there are other government-led schemes available to help you do so, such as the Shared Ownership scheme. The Shared Ownership scheme is useful to anyone who can’t afford a deposit and mortgage repayments on a house. Rather than buying a full property, you buy a share of the house and pay the rest to the landlord through rent. You’ll need to buy between 10% and 75% of the market value price of the property, as well as be able to put down a 5% to 10% deposit on the property.

“It may also be worth opening and investing in a Lifetime ISA to help you save money towards a house. With these types of ISAs, you can save up to £4,000 every year and there is a 25% bonus on your savings from the government – so there’s a possibility of saving £5,000 a year with a Lifetime ISA.”

In addition to this, with the final date to apply for Help to Buy equity loans coming up on the 31st of October, new research by money.co.uk reveals the English authorities that have taken out the highest value of Help to Buy equity loans.

The 10 areas that have taken out the highest value of Help to Buy equity loans

Across England, 355,634 equity loans have been approved since 2013. The total value of these 355,634 equity loans totals £22,032,757,401 (£22 billion). This equates to an average value of £61,953 for each equity loan in England.

The top three authorities that have used the highest value of Help to Buy equity loans the most are all found in London. Westminster, Hammersmith and Fulham, and Kensington and Chelsea are the 3 locations in England with the highest total value of equity loans.