Clock is ticking on Help To Buy for first-time buyers
FIRST-TIME buyers could be left high and dry by Help to Buy as the cost of missing the final deadline has been revealed.
Research by the gradual homeownership provider, Wayhome, shows that first-time buyers in danger of missing the final Help to Buy completion deadline of Friday, March 31, could have to find an additional £52,218 in order to complete their purchase.
Although the Help to Buy application deadline passed in October, those who applied for a loan before are still able to benefit from the scheme.
While it’s unknown how many buyers could be impacted, hundreds have signed a petition calling for a deadline extension, with hundreds more also joining a Facebook group called “Lost out due to Help to Buy equity loan build deadline. Extension Required”.
For those who fail to meet the deadline, they will no longer be eligible for the five-year interest-free loan and will be required to find the additional funds that would have been fronted by the scheme in order to complete on their purchase.
They will be able to have their reservation fee and deposit refunded, but will incur any additional costs such as legal or financial advice, as well as seeing their property purchase collapse.
The average first-time buyer who applied before the October deadline, and utilised the full 20% Help to Buy loan, could have done so based on the average first-time buyer house price of £261,091
This means that should they fail to meet the completion deadline, they will need to find more than £52,000 to fill the Help to Buy void and keep their property transaction afloat.
This potential additional cost climbs as high as £186,199 in the capital, where London’s first-time buyers were able to borrow as much as 40% of a property’s value with a 5% minimum deposit.
Failing to find the funds previously fronted via the scheme would see firsttime buyers forced back into the market at a time of higher costs.
Based on the December average firsttime buyer house price of £262,527, new homeowners could be forced to borrow a further £27,330 to cover the marginal increased cost of homeownership and bridge the gap left by Help to Buy.
The cost of their deposit and their mortgage repayments would also increase by a combined £38,621 over the first five years of homeownership.
Nigel Purves, co-founder and CEO of Wayhome, said:“The Help to Buy clock is ticking and those that are yet to complete their purchase are running the risk of having the carpet pulled from beneath them come the end of March.
“If they don’t complete in time, they face the huge task of finding thousands of extra pounds in order to keep their purchase alive. If they fail to do so, they have no other choice but to let the transaction collapse, returning to the market in search of a new home which will also see the cost of homeownership jump dramatically.”
Mr Purves believes anyone finding themselves in this predicament is facing “a very tough choice” but insists there are other routes to getting on the property ladder.
He added: “Although it may certainly seem like a huge step backwards, don’t panic, there are other options that can help give you a financial foot up on to the property ladder.”