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Is it too late to apply for the Help to Buy Equity Loan?

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The deadline for Help to Buy may be weeks away, but the house buying process isn’t always plain sailing. Is there still time to apply or is it a lost cause?

The deadline for applications for the Help to Buy Equity Loan scheme is 6pm on Monday 31 October 2022.

Homes England, which runs the scheme, said this would give applicants enough time to complete their purchase by the 31 March 2023 scheme closure date, based on statistics from house developers on how long the process takes between reservation and completion.

But there’s also another deadline buyers need to be aware of. To be eligible, the homebuilder must have finished building your home so it’s ready to live in, and it must have received a new-home warranty by 31 December 2022.

Given all these deadlines, the first of which falls just six weeks away, should you consider applying?

Benefits of the Help to Buy Equity Loan

The latest version of the Help to Buy Equity Loan scheme launched in April 2021, limiting it to first-time buyers. You can buy a new-build property with a minimum 5% deposit while you get an equity loan of up to 20% of the purchase price (40% in London). The loan is interest-free for the first five years.

There’s also a maximum property purchase price limit which varies depending on which region you’re buying in. For example, in London, it’s capped at £600,000, while in the North East, it’s £186,100. Meanwhile in the South West it stands at £349,000.

The most recent figures from the Department for Levelling Up, Housing and Communities showed a fall in applications at the start of this year, with just 5,395 properties bought using an equity loan between January and March, down by 65% from the same period in 2021.

Meanwhile, the total value of equity loans was £448m, supporting the purchase of £1.7bn worth of property.

So, if you think the Help to Buy Equity Loan scheme could help you get on the property ladder, is there still time to apply?

‘Make like Usain Bolt and get a sprint on’

Rob Peters, director of Altrincham-based Simple Fast Mortgage, said: “House buyers who want to use the Help to Buy scheme better make like Usain Bolt and get a sprint on. Buyers must have found and reserved a property before the deadline. Importantly, buyers need to ensure the application is completed correctly because if there are unacceptable changes, the homebuyer cannot re-apply after 31 October 2022.”

James Miles, director of Exeter-based broker, The Mortgage Quarter, said: “If you want to bag yourself a Help to Buy equity loan, you’d better be quick. You will need every professional at your disposal to be on fire with the process. Is it worth the stress? Remember the builder needs to have completed the build by the end of this year. Get in touch with a broker and discuss all the avenues you have to buy a property and find the right property in the right time to fit your circumstances.”

However, Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages, said although there is still time to apply before the deadline, the real issue is finding a builder that has available properties that will be ready in time.

He explained: “Most builders typically look to secure a buyer six months before the house is fully built. With the practical deadline for houses to be built being 31 December, most of the properties that will be ready for this deadline will have been sold a number of months ago so there will be limited availability of properties that the scheme can be used on.”

Out of pocket and emotional disappointment

Lennox added that for buyers already undergoing the process, “one welcome relief is that if the deadline can’t be met, they will be refunded their reservation fee and, if contracts have been exchanged, unconditionally released from this with their deposit refunded.”

However, he warned that despite this, buyers are still probably be out of pocket as they will likely have already paid a series of fees for legal and mortgage advice, on top of the emotional disappointment if they don’t get keys to their property.

Meanwhile, Paul Neal of Derbyshire-based Missing Element Mortgage Services, said if a potential buyer hasn’t got an application in already, “then chances are you won’t meet the deadline”.

Alternative homebuying options

However, Lennon said not all is lost. “Alternative options still remain slim pickings. But more lenders are now willing to accept smaller deposits on new builds, as historically they’ve often needed a larger deposit when not using the scheme. There are other schemes to help people get on the housing ladder such as shared ownership and some small localised shared equity schemes,” he said.

This is echoed by Peters, who said: “There are other 5% deposit solutions available in the market including 95% mortgages and equity loans from a variety of providers. Though none are as low cost as Help to Buy, they can give those with a small deposit the ability to purchase a home.”

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