Property developers registering for Help to Buy is proving an important marketing tool with over one million people being reported as having used this government initiative to buy a new home.

What is Help to Buy?

There are three Help to Buy schemes, namely; Help to Buy ISA which provides first-time buyers with £50 for every £200 saved and a maximum bonus on a property completion of £3,000; Help to Buy Equity Loan where 20% of the cost of a new home is provided by the scheme with the buyer having to put in a minimum of just 5% and London Help to Buy that provides an equity loan of up to 40% with buyers putting in 5%.

Help to Buy is an equity loan to all new home buyers and provided by the Homes and Communities Agency (HCA). The scheme has been available since 2013 and in November 2015, the Government announced an extension of the initiative until 31 March, 2021 (although it may end earlier if all the funding is taken up before then).

Buyers using the scheme can borrow equity from Help to Buy in England of up to £120,000 and up to £240,000 in London with their own contribution of at least 5% of the purchase price. After five years the buyer has to pay an interest fee of 1.75% of the amount borrowed from Help to Buy, rising each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%. The loan is repayable after 25 years or upon the sale of the property at the same proportion as borrowed.

The Help to Buy Equity Loan is, of course, a strong incentive for new home buyers and Saxon Trust (previously Calmez Ltd) have been helping provide support for property developers registering for Help to Buy.

Property developers registering for Help to Buy

As property developers registering for Help to Buy you will have to create an account with the HCA Investment Management System (IMS) and provide financial forecasts which represent an estimate of the potential demand for the Help to Buy Initiative. Of course, the HCA set a number of standards that will determine that the project is eligible for Help to Buy which, amongst many, will include:

  • Being fit for occupation as a residential development in accordance with the requirements of the NHBC and with the benefit of an NHBC (or equivalent) guarantee
  • Complies with all relevant statutory and/or planning requirements, including current building regulations in force at the date of completion
  • Has a Market Value below the Maximum Limit which is currently £600,000

Property developers registering for Help to Buy, known as ‘providers’ will be required to enter into a signed contract with the HCA covering all the terms on which equity loans will be made available for individual purchases.

When marketing the scheme, property developers will usually have great experience in sales promotion, however, the HCA require a consistent message from all providers. Consequently, key guidelines must be followed but, again, Saxon Trust has helped in marketing support Property developers registering for Help to Buy.

Accordingly, property developers registering for Help to Buy will have to allow a few months for the submission process and be ready for plenty of paperwork but the eventual benefits can, of course, bring new potential buyers to a project.

Saxon Trust offers property development loans to developers and builders with proven track records. For more information on property development loans then please contact us here or by calling 0203 3710 511.

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