Help to Buy equity loan scheme to close to applicants on Monday – here's what you need to know

Designed to help prospective homeowners onto the property ladder, first-time buyers in England can use the scheme to borrow up to 20% of a property's price via a Government loan, interest-free for the first five years. This helps buyers both to stretch their budget and access mortgages with cheaper interest rates. 

Since its inception in 2013, more than 355,000 new-build properties have been bought with the help of an equity loan. The total value of these equity loans has been more than £22 billion.

But according to the Government, there are no plans to extend or replace the scheme when it ends. So any prospective buyers planning to use the scheme need to apply for it by 6pm on Monday next week.

Full details about how the scheme works – including pros and cons, when interest payments kick in and when the loan needs repaying – can be found in our Help to Buy equity loan guide.

Key Help to Buy equity loan scheme deadlines

For any first-time buyers still wishing to use the equity loan scheme, there are some key dates to be aware of:

• 6pm on Monday (31 October).This is the date by which you need to have both reserved your property with the homebuilder AND submitted your application to take part in the equity loan scheme with your local Help to Buy agent.

• 31 December 2022. This is the date by which your property must be physically built and ready for you to live in. 

• 31 March 2023. This is the date by which you must have legally completed on your property and picked up the keys. 

If any of these deadlines are not met, you will not be eligible to use the equity loan.

Where your homebuilder has not built your property by 31 December, you will – if you do not wish to continue with the purchase – be able to reclaim any reservation fee paid. Where you have already exchanged contracts, you should be released unconditionally from the contract and have your deposit refunded.

More details about the deadlines and what is required can be found on the Gov.uk website.

How the Help to Buy equity loan scheme works

The equity loan scheme is aimed at first-time buyers in England, with at least a 5% deposit, who are looking to purchase a new-build home.

Via the loan, you can borrow up to 20% of a property's value from the Government, interest-free for the first five years. Essentially the loan acts as a means of topping up a deposit, which either increases your budget or reduces the size of the mortgage you need to apply for (or a combination of both). This is helpful for those struggling to afford a property or to help you to qualify for cheaper interest rates.

For example, on a £200,000 property, a first-time buyer with a 5% deposit could use the equity loan to borrow up to £40,000. Instead of then having to apply for a 95% mortgage (worth £190,000), they'd only need to apply for a 75% mortgage (worth £150,000), where interest rates are typically much cheaper. See our Mortgage best buys tool to compare rates.

Depending on which region of the country you live in, there is a price cap on the property eligible to be bought via the scheme. And when you come to repaying the equity loan, the Government will jointly benefit from any increase in the value of your property. See our Help to Buy equity loan guide for more info.

Struggling to save for a deposit? Other homebuying help to consider 

If the Help to Buy equity loan scheme isn't right for you – or you won't qualify in time – there is other homebuying help out there if you need it. This includes the following schemes, which are all UK-wide:

• Lifetime ISAs. 

  Anybody between 18 and 39 can open a

   

  Lifetime ISA, where you can save up to £4,000 a year, with the Government adding a bonus of up to £1,000 a year too. This can be used towards the purchase of a property (maximum price cap of £450,000). See Lifetime ISAs.

• Shared ownership. 

  Here you buy a share of a property – typically between 25% and 75% – and pay rent on the share you don't own. See Shared ownership.

• 95% mortgage guarantee scheme. This is a form of 95% mortgage, where the Government shoulders some of the risk with the mortgage lender. It was launched to encourage more lenders to offer 95% mortgages. See which lenders are taking part in our Mortgage guarantee scheme guide.