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Nigel Woollsey

Online Writer
Published: 18/10/2019
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The Government has introduced a change to the existing Help to Buy rules, allowing those buying a home under this scheme to take out a maximum mortgage term of 35 years – replacing the old limit of 25 years.

In a move that acknowledges more than half of all residential mortgages are now available with terms up to 40 years, the Government has moved to close a loophole that has seen purchasers using the Help to Buy scheme limited to a repayment period of 25 years.

The changes, which are already in force, enable Help to Buy homebuyers to spread their repayments over a longer term, therefore reducing their monthly repayments accordingly.

Previously, when taking out a new mortgage or remortgaging after enjoying a fixed rate period, Help to Buy purchasers were unable to take out deals that would go on for longer than 25 years beyond the date of their house purchase. This effectively forced people into accepting deals that, although for shorter periods, had monthly repayments that were higher than those outside the scheme who could choose to opt for the new, longer mortgage terms.

How does the Government’s Help to Buy scheme work?

The idea of this equity loan scheme is reasonably simple: its purpose is to help borrowers secure a 95% loan-to-value (LTV) mortgage on a new build property.

The Government lends the buyer up to 20% of the value of a new build home outside of London – this rises to 40% inside London. Applicants will need to have saved at least 5% of the property value as a deposit to qualify for a Help to Buy equity loan. You can then use this deposit of at least 25% to access a range of Help to Buy mortgages from participating lenders for the remaining 75% of the cost of your new home.

Help to Buy equity loans can only be taken out for new build properties of £600,000 or less and cannot be used to help with the purchase of older homes. This must also be the buyer’s sole residence.

More information can be found in our handy Help to Buy guide online.

Helping new buyers onto the housing ladder

The Governments Help to Buy scheme was introduced in 2013 and since then has assisted more than 210,000 people in England to purchase their own home. However, unlike in England, scheme members for Help to Buy in both Scotland and Wales did not have a set maximum mortgage term. This disparity has now been rectified by the new Help to Buy rules that will enable English Help to Buy homeowners and first-time buyers to access a much broader range of repayment terms.

While this is generally seen as good news, it is also a reality that longer repayment terms mean that mortgage customers will be paying more in total, due to interest being charged over a longer period.

Help to Buy was scheduled to end for all applicants in April 2021 but this deadline has been extended for first-time mortgages only to 2023. In addition, from April 2021, there will be regional price caps in place that limit the maximum value of homes that can be purchased through this equity loan scheme. These will range from £186,100 for homes in the North East to the maximum limit of £600,000 for London residential properties.

Those interested in the range of home purchase loans currently on offer in the marketplace can see the latest deals on our first-time buyer or remortgage comparison tables.


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