The new Help to Buy scheme for buyers wishing to purchase a new-build home launches in April, with substantially different terms from those available under the previous iteration of the scheme, which ran from 2013 and ends in March this year.
Nicola Tubbs, a Director with Palmers Solicitors who heads up our residential property team, explained: “Unlike the current scheme, the new scheme is limited to first-time-buyers and is subject to regional caps on the value of the property it can be used towards, ranging from £186,000 in the North East to £600,000 in London.”
Buyers can use Help to Buy to access a loan worth between five and 20 per cent of the purchase price on properties outside London and up to 40 per cent of the purchase price in the capital.
Additionally, buyers will need to have saved up deposits worth between five and 25 per cent of the purchase price to access a Help to Buy loan.
The Help to Buy loan is interest-free for the first five years, although buyers will need to pay a £1 a month management fee. From the sixth year of the loan, buyers will be charged interest of 1.75 per cent that increases annually through multiplication with the consumer price index, plus two per cent.
Loans must be repaid on the sale of the home or, otherwise, after 25 years. This amount is tied to the value of the home on sale, meaning that buyers who borrow five per cent of the value of their purchase would have to pay back five per cent of the later sale price, even if that is significantly higher than the value of the original loan.
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