Help-To-Buy Scheme, First-Time Buyers Guide

If you’re a first-time buyer, you’ve likely heard of Help To Buy, the government’s scheme to help buyers progress along the property ladder.

But did you know the Help To Buy scheme is changing on 16 December 2020?

While Help To Buy remains a great way to secure your first home, the new measures may impact which properties first-time buyers can apply for. This first-time buyer guide will help you understand the new rules and how they impact which property you can buy.

young couple celebrating moving in to their new home

A first-time buyer’s guide to the Help To Buy scheme.

The government’s Help To Buy scheme aims to make getting your foot on the housing ladder as easy and affordable as possible.

While it’s not the only way to get on the property ladder as a first-time buyer, it does make it cheaper upfront.

Under the scheme, buyers can pay as little as 5% of the housing price upfront, thanks to help from a government equity loan of up to 20% of the property’s value (or 40% in London).

Under this loan, you have 5 years to make repayments before any interest will be charged. Interest then starts at 1.75%, rising each year in April by the Consumer Prices Index plus an extra 2%.

The remaining cost is covered by a repayment mortgage.

It’s important also to note that the Help To Buy scheme only applies to new builds.

If you would like to learn more about how to get on the property ladder as a first-time buyer, check out our first-time property buyer’s guide.

What are the new Help To Buy scheme rules for first-time buyers?

The government’s new Help To Buy scheme comes in on 16 December 2020. Meanwhile, the old scheme will be phased out by 1 April 2020. The changes relate specifically to equity loans from the government.

Firstly, price caps for homes you can purchase under the Help To Buy scheme now vary by region (whereas before there was a nationwide cap of £600,000). According to an analysis of government data on house prices and Help To Buy loans, some areas may be negatively impacted by a cap which is lower than the average new build price, but most areas have a cap which is above the average.

This means it will be important to check the cap for the specific region you are looking to buy a home in, and whether the house price you want is still available under the scheme.

Secondly, the scheme is now limited to first-time buyers only (unlike the current scheme which is available to existing homeowners as well). As a first-time buyer, this won’t affect you immediately, but it’s important to be aware you can’t rely on the scheme again once you’ve bought your first home.

Under the new Help To Buy scheme, you can still borrow up to 20% of the total property value (or 40% in London) under the government’s equity loan.

Young family just moved in to their new built house

Tips for first-time buyers using the new Help To Buy scheme

As mentioned previously, it’s important to check the price cap for the region you want to buy in and to be aware that you can’t use Help To Buy again in future.

You should also check that the property developer is registered with the Help To Buy scheme. Not all new builds are available under this scheme, so you will want to be certain that the home builder is registered under Help To Buy before you fall in love with a property. Otherwise, you may be disappointed down the line when you can’t access Help To Buy support for buying your home.

If you’re a first-time buyer, you’re eligible for Help To Buy and the home builder is registered with the scheme, you’ve got the green light to make an offer on your new home! You’ll be able to reserve your home under the new scheme from 16 December 2020 and can move in from 1 April 2021 when the scheme comes into full swing.

Conclusions for first-time buyers using the Help To Buy Scheme

This first-time buyer guide will have given you a good overview of how Help To Buy works and will have made you aware of the new changes to government equity loans under the Help To Buy scheme.

For more in-depth information on the scheme, check out the government’s Help To Buy guide.

If you’re thinking to buy but aren’t sure what you can afford, check out our online budget calculator to get a quick and easy indication of how much you could spend on your new home.