Prospective homeowners threw a lifeline when the government extended the deadline to build Help to Buy beyond December
- New construction must now be ready in February to qualify for the scheme
- This will extend the deadline by two months, giving home builders more time
- The move is because coronavirus hinders construction delivery times
New buyers whose purchases were delayed by the coronavirus have become a lifeline following a government decision to extend the Help to Buy scheme.
While Help to Buy in its current form still ends in March next year, homebuilders now have an additional two months to finish building eligible properties under the scheme.
This will be good news for first-time buyers, who have suffered a double blow from delays in new home delivery and sharply reduced mortgage options as lenders have concluded low deposit deals.
Home builders are now given two months to complete building Help to Buy properties
Help to Buy will still begin a planned phase-out from March 2021, limiting the scheme to new buyers only and imposing regional limits on the value of eligible homes.
Home builders now have until February 28 to build homes. Most home buyers must have purchased their home by March 31, 2021.
The government said some homebuyers will have more time to purchase and move into their homes if they reserve it by June 30, but serious delays in purchasing have occurred due to coronavirus eligibility.
Alex Rose, director of new homes at Zoopla, said: “The demand for real estate buying assistance is unshakable, so this news is a temporary relief for both home builders and real estate agents, but especially those thousands of buyers whose purchase assistance could otherwise are compromised. ‘
But he added, “While today’s news is pushing up purchase plans for some buyers, many of whom are likely to be the second step, it is uncertain how many of them will miss this extended deadline.”
Currently, the controversial government arrangement offers both first-time buyers and home movers a loan of up to 20 percent, or 40 percent, in London to help them buy a new build home.
This means buyers have to make a 5 percent down payment to get a 75 percent mortgage, while the equity loan makes up the rest.
In London, buyers can make a 5 percent down payment and get a 55 percent mortgage.
The scheme aims to make purchases more affordable the lower the loan-to-value, the borrowed amount is lower, and the mortgage interest rate, which is why monthly repayments must be lower, too.
The catch is that you have to pay interest on the loan after five years.
Since it is a stock loan, the government will also own a share in any appreciation of your property. This means that the loan grows as your property grows in value.
However, if the value of the property falls, the size of the loan increases.
Critics of the plan claim it has pushed up house prices – meaning homebuyers are left with longer mortgages for longer.
What you need to know about Help to Buy
Help to Buy is hugely controversial, but it has also delivered on its promises by helping many people buy homes.
So, is it borrowing twenty percent interest-free for five years to buy a new home as a buyer?
What should you pay attention to before signing up?
And why is it considered a bad economic move?
Find out and more in this special excerpt from the This is Money podcast.