When Does the Help to Buy Scheme End?

The “Help to Buy” scheme was a government-backed initiative in the United Kingdom designed to make homeownership more accessible, particularly for first-time buyers, by reducing the initial financial burden of a large deposit. While this UK program has concluded, prospective homeowners in the United States have access to various distinct programs and resources to support the homebuying process.

The Equity Loan Scheme’s Conclusion

The Help to Buy Equity Loan scheme, a component of the UK’s housing support, concluded for new applicants on October 31, 2022. All properties utilizing the scheme were required to reach legal completion by March 31, 2023. No further extensions or exceptions were granted for new applications or completions beyond these dates.

Managing an Existing Help to Buy Equity Loan

For homeowners in the United Kingdom who previously secured a Help to Buy Equity Loan, the obligations and processes for managing this existing financial arrangement continue. The equity loan typically becomes repayable either after a set term, often 25 years, or earlier upon the sale of the property. It also becomes due if the homeowner remortgages the property without fully retaining the loan, or if other specific conditions outlined in the loan agreement are met.

The amount required to repay the equity loan is not fixed at the original borrowed sum; instead, it is determined based on the property’s current market value. Homeowners must obtain a valuation report from an independent Royal Institution of Chartered Surveyors (RICS) certified surveyor. This report, typically valid for three months, must be submitted to the loan administrator shortly after its issue.

When considering remortgaging, homeowners must account for the outstanding equity loan. Many lenders may require the equity loan to be fully repaid as part of the remortgage process, which can be achieved by increasing the primary mortgage amount or using other funds. If the equity loan is not fully repaid, the administrator of the Help to Buy scheme will need to agree to “subordinate” their charge, meaning their loan remains secondary to the new mortgage.

Upon selling a property with an outstanding Help to Buy Equity Loan, the loan must be repaid from the sale proceeds. The repayment is a percentage of the final sale price, mirroring the original percentage of the property’s value that the equity loan represented.

Homebuying Support Without Help to Buy

While the UK’s Help to Buy scheme has concluded, various government-backed programs exist in the United States to assist prospective homebuyers. These initiatives aim to make homeownership more attainable by addressing common financial barriers such as down payments and favorable loan terms. Understanding these options is a practical step for individuals navigating the US housing market.

One widely utilized option is the Federal Housing Administration (FHA) loan, insured by the FHA, a part of the U.S. Department of Housing and Urban Development (HUD). FHA loans offer lower down payment requirements, typically as little as 3.5% for borrowers with a FICO score of 580 or higher, and 10% for those with scores between 500 and 579. These loans are designed to be more accessible for individuals who may not qualify for conventional mortgages due to credit history or limited savings.

For eligible service members, veterans, and surviving spouses, Department of Veterans Affairs (VA) loans provide benefits. VA loans often require no down payment and do not necessitate private mortgage insurance, which can result in lower monthly housing costs. Eligibility for a VA loan is based on specific service requirements, and applicants must obtain a Certificate of Eligibility (COE) from the VA.

The United States Department of Agriculture (USDA) also offers home loan programs for properties in eligible rural areas. USDA Rural Development loans, specifically the Guaranteed Housing Loan Program, can allow for no down payment for low- to moderate-income borrowers. These loans have income limits and property location restrictions, promoting homeownership and economic development in less dense areas.

Beyond these primary loan types, various Down Payment Assistance (DPA) programs are available across the country. These programs, offered by federal, state, and local government agencies, as well as non-profit organizations, provide financial aid for down payments and/or closing costs. DPA can come in the form of grants, which generally do not require repayment, or forgivable/deferred loans that may be repaid only under certain conditions or after a specific period. Eligibility for DPA programs often depends on factors such as income, location, and whether the applicant is a first-time homebuyer.