By Arash Remasi, partner and head of new build outright
The positive impact over the years on the lives of many homeowners that Homes England has achieved though their equity loan assistance scheme is undeniable. It has helped so many people get onto, and indeed even move up, the property ladder earlier than they may have otherwise been able to, in the main due to the larger deposits required by lenders that has, sadly, become the norm in today’s lending market.
The current incarnation of this, the Help to Buy Equity Loan: 2021-2023 scheme, will certainly be no different. The scheme however does undoubtedly have certain strict requirements and complexities that need to be fully understood and embraced in order for a matter to reach a successful exchange and completion. That said, these should be for a buyer’s professional advisors to undertake diligently behind the scenes (hopefully utilising all their knowledge and experience!) rather than for a buyer to have to think about as, in essence, a legal advisor’s job is to make the transaction as approachable and simple as possible for a buyer.
When we as a firm started out on the equity loan “journey”, the scheme was known as HomeBuy Direct, which I am pleased to (just about!) recall, worked by way of the government and the housebuilder providing two separate equity loans to a buyer of a new home. This then evolved into to the FirstBuy scheme, which gave a single equity loan from the government to a first time buyer of a new home. It then became Help to Buy Equity Loan: 2013-2021, changing the eligibility criteria to allow existing homeowners to also benefit from a single equity loan from the government when buying a new home to live in.
At Direction Law we have acted for thousands of buyers purchasing under the various equity loan products above, and so we share the positive view held, no doubt, by those of you reading this article who intend to benefit, or indeed may already have, from Homes England’s latest equity loan product, the Help to Buy Equity Loan: 2021-2023 scheme. On this, some key information and considerations for buyers is available online in a really approachable format at https://www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide. To summarise, some key parts of the latest scheme are that it:
Reintroduces the requirement for the equity loan from Homes England being available only to first time buyers.
Continues with no interest being payable for the first five years of the equity loan.
Allows a buyer to borrow a minimum of 5% and up to 20% (or 40% if in London) of the market value of their new home, subject to new regional maximum price caps.
Stipulates that a buyer must arrange a mortgage with a bank or building society of at least 25% of the purchase price of their new home.
Provides that a buyer must pay off the equity loan when paying off their main mortgage, selling their home or reaching the end of the equity loan term, which is normally 25 years.
Requires that applications made by a buyer that is married, in a civil partnership, or in a co-habiting relationship, either now or on legal completion of their purchase, will have to be a joint application with any such partner or spouse.
The key message I really want to get across, particularly if you are reading this as a potential buyer, is the importance of instructing professional advisers to act for you who specialise in equity loans, whether that be your legal advisor acting for you on your conveyancing or your mortgage broker in relation to applying for the loan. In short, when appointing a professional advisor to act on a Help to Buy equity loan matter it is their experience that counts, now more so than ever before!
Every year Direction Law acts for thousands of conveyancing clients and we have large specialist teams dealing with all aspects of newbuild properties, including all affordable housing schemes (such as shared ownership through to discount market sale schemes), as well as dealing with more traditional “high street” conveyancing matters.
For further information visit
www.directionlaw.co.uk or for an instant quotation call 0800 158 82 81.