Help to Buy extension: The state may extend the scheme due to COVID-19 – details revealed

Help to buy ISAs can provide savers with a tax free bonus from the government when they use the money within the account to purchase a home. Further support from the government can be received if this is utilised in tandem with a Help to Buy equity loan.

This equity loan scheme can provide people with a loan to help them buy a home with a relatively small deposit.

To be eligible for the scheme, the purchaser must fund at least 80 percent (60 percent in London) of the sale price with a mortgage and at least a five percent deposit.

The purchase price itself must be no more than £600,000.

If the scheme is used, there will be no interest charged on the loan for the first five years but beyond this, interest fees will start at 1.75 percent and rise each year in line with CPI.

Additionally, owner occupiers’ housing costs will also be applied.

The scheme in its current format will end in April 2021 and a new version will run from April 2021 to March 2023.

This new version of the scheme will only be available for first-time buyers.

Under the current rules sale transactions must be agreed by December 2020.

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However, the government is reportedly considering extending this deadline due to coronavirus-related delays that buyers have had to endure.

If this extension is to occur, buyers will likely be able to extend their purchases into 2021.

The potential extension was commented on by Tom Brown, the Managing Director of Real Estate at Ingenious. 

As he detailed: “Despite the extension to the Help to Buy scheme remaining at the proposed stage, there has been speculation across the industry for some time that the original transitional timelines might need to be changed to reflect the closedown in the market through lockdown and the related challenges in building and construction, which have seen delays in the delivery of projects across all sectors.

“We know there has been support for these proposals from Homes England and the Ministry of Housing, Communities & Local Government, however the final decision rests with HM Treasury and ultimately the Chancellor, Rishi Sunak.

“They face unprecedented challenges across the whole economy and will be engaged in a very delicate game of give and take.

“We would expect the final announcement to be a short extension to the existing scheme and not anything more structural, however this will of course be subject to change down the line.”

It should be noted that while the Help to Buy equity scheme may end in the coming year, Help to Buy ISAs can be held and used over a much longer time frame.

Help to Buy ISAs can no longer be opened but people who already hold them can continue to invest in them until November 2029.

The final date that people can claim Help to Buy bonuses is December 1 2030.

Help to Buy ISAs can pay out a maximum of £3,000 in bonuses.

Lifetime ISAs were launched to replace Help to Buy ISAs, offering much more generous bonuses which can be as high as £33,000.

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