For first-time buyers in England, buying a property in itself can be overwhelming and confusing, let alone understanding the different schemes on offer and all associated costs.
There are a lot of expenses associated with purchasing a home and saving at least a 10% deposit can be extremely tough. Therefore, you may want to consider using the new Help to Buy Equity Loan. The scheme is a great way to get on the property ladder and is available exclusively to first-time buyers on new-build homes only.
Our guide explains everything you need to know about the new Help to Buy Equity Loan and how to use it.
What is the new Help to Buy Equity Loan?
The Help to Buy Equity Loan is a Government scheme to help first-time buyers purchase a property with just a 5% deposit. This scheme was open for new applications from 16th December 2020 and will run until 31st March 2023.
Providing you’re eligible, the Government will provide an equity loan of up to 20% of the cost of your new-build home (or 40% in London), interest-free for the first five years. This means you’ll only need a 5% deposit and 75% mortgage to make up the rest.
The costs involved with the new Help to Buy scheme have changed slightly depending on where in the country you plan to buy. Each region in the country has new price caps. Take a look at the regional price caps so you can get a better idea of the maximum price of a home for which the scheme applies.
We have a number of homes across selected developments all over the country where you are able to use the Help to Buy scheme. If you have any questions about which homes are available under the new Help to Buy scheme, simply get in touch with our Sales Consultants – they’re on hand to help.
How do you buy with the new Help to Buy Equity Loan?
Step 1: Find the home you would like to purchase
Firstly, you’ll need to find the development and home that’s right for you. St. Modwen Homes has developments across the country including the Midlands, the South West, the South East and London, and the North West, all of which have a range of homes suitable for first-time buyers.
Once you have found the development you are interested in, you’ll simply need to get in touch with the Sales Consultant to see which homes are available to purchase using the Help to Buy Scheme. Our Sales Consultant will also run through a few questions with you to check that you’re eligible to use the scheme.
When choosing the home you would like to purchase, it’s important to take a number of factors into consideration when looking at homes to buy including local amenities, transport links, nearby schools if relevant, and the size of the property.
Location is one of the most important factors to consider when purchasing a home. You should think about what you need from your location and what you would like nearby. For example, country parks may be a priority for you, or nearby transport links if you regularly commute to work. At St. Modwen Homes, the locations in which we build are carefully selected. We choose to build our homes in places that have great access to public services, employment, education, a range of amenities and the countryside.
When choosing your housetype, it’s important consider not only your needs from a home right now, but also in the future. Think about the ideal size of the property you would like, as well as the size of the garden and also design features. Our homes are made for real life, with our customers at the heart of all of our design decisions. That’s why all of our homes have thoughtful layouts, with generous amounts of storage space and flexible bedrooms that can adapt to your needs.
If you need any additional information about the location or housetype that you’re interested in, our Sales Consultants are on hand to help.
Step 2: Get an affordability check and obtain your Decision in Principle
Prior to reserving your new home, you’ll need to speak to a financial adviser to get an affordability check and obtain your Decision in Principle, both of which can be done during the same call. Your financial advisor will also run through a few questions to ensure that you’re eligible to purchase the property using the Help to Buy Equity Loan.
An affordability check will need to be completed to determine roughly how much you can borrow from a mortgage lender. This is not a credit check, it is just to give you an idea of how much you can afford. Your financial adviser will ask a few questions about your income and also what your outgoings are. They will then be able to give you an estimation of how much you’re likely able to borrow from a lender.
A Decision in Principle is slightly different. It is a written estimate from a mortgage lender giving you an indication of how much money you can borrow. Your financial adviser will ask you a few more questions including personal details such as your name, date of birth and address, address details for the past three years, information about your income and also information about your expenditure and existing credit agreements. Your financial adviser will then check which lenders are available based on the information you have provided.
Once you have your Decision in Principle you will be able to reserve your home. When you have reserved, you will need to instruct a solicitor. A solicitor will be required to handle the legal aspects of your purchase. This involves carrying out local authority and land registry searches, liaising with Help to Buy, explaining the details of the contract to you, arranging the funds from the lender, and exchanging and legally completing your purchase. If you haven’t got a solicitor, you can get in touch with one of our partner solicitors, or you can seek your own.
Step 3: Complete the Help to Buy paperwork
You will then work with your financial advisor to fill out the Help to Buy paperwork. This will include a Property Information Form which will be used to progress the purchase of your new home.
The Property Information Form provides the Help to Buy agent with all the information relating to the property you wish to purchase through the Help to Buy Equity Loan scheme. Once you have completed the Property Information Form this must be submitted to the Help to Buy Agent for your area.
Providing everything is ok, you will receive the Authority to Proceed. This is a letter from the Help to Buy agent confirming that you’re eligible for Help to Buy and can proceed with the purchase of the property. There will be a full financial breakdown of any of the terms of sale included in the letter.
You will then be required to complete the Solicitor’s Form 1. In basic terms, this requests approval to exchange contracts from your Help to Buy agent. The Solicitor’s Form 1 must be provided no later than 5 working days prior to the anticipated exchange date. Assuming all the forms are accurate, your Help to Buy agent will approve the exchange and issue your solicitor the Authority to Exchange.
Step 4: Exchange of Contracts
Once you have received the Authority to Exchange, you will then exchange contracts. Exchange of Contracts is the point at which your property transaction becomes legally binding. Upon Exchange of Contracts you will be required to pay your deposit. As you will be using the Help to Buy Equity Loan, it is likely that your deposit will be 5% of the purchase price, meaning this will be the minimum amount that you will need to put down yourself. Your financial advisor will have already discussed the deposit amount with you at an earlier stage so you’ll know exactly how much you need to pay.
You’ll then be required to fill out the Solicitor’s Form 2. This form will need to be completed by you in advance of completion. You must provide the Help to Buy agent with the signed and dated Solicitor’s Form 2 no later than 5 working days prior to the anticipated completion date. You will then need to comply with the undertakings set out in the Solicitor’s Form 2.
Step 4: Legal Completion and move into your new home
Following Exchange of Contracts, you’re one step closer to Legal Completion! Legal Completion is the final step in the legal process of transferring ownership of property over to you.
Closer to legal completion you will be invited to the property to have your new home demonstration. This appointment is so your housebuilder can show you how to use your new home, for example how to use the central heating, fire alarm, and so on.
On the agreed completion date, you will become the owner of your new home. The completion money will be transferred from your mortgage lender to St. Modwen Homes. Once the solicitor has confirmed that the money has been received, the keys will then be released. It’s then time for the most exciting part – moving in!
You can then begin the new journey in your new home. However, we understand that buying your first home can be overwhelming. So don’t worry, you won’t be left on your own. We will arrange a 7-day courtesy call to check how you’re getting on and ensure you have everything you need. If you have any additional queries following the 7-day visit, you can simply get in touch with our Customer Service team who will be on hand to help.
Ready to start your search?
Knowing you can purchase with just a 5% deposit, you could be in your new home sooner than you think. Take a look at the range of homes we have available at a development near you.