Help to Buy: top tips for your purchase (Part 1)
Between 1 April 2013 to 31 March 2020, thousands of properties were bought using the Help to Buy: Equity Loan scheme (HTB). However, from 1 April 2021, the scheme was only available to first-time buyers. Despite this change (together with the end of the stamp duty holiday, the impact of the pandemic, and the re-introduction of the 95% mortgage), there has been a record number of Help to Buy homes purchased in 2020-21.
It’s easy to see the appeal of a brand-new home and a reduced deposit to help you onto the property ladder! Buying a home can be the biggest purchase most people make in their lifetime and, although it is in an exciting time, we do understand that it can also be a daunting process, when you have never done it before.
Here at Bolt Burdon, we have an experienced new build residential real estate team with vast experience dealing with HTB. This article is Part 1 of our ‘top tips’ and FAQs to ensure your purchase is as smooth, seamless and as stress-free as possible, starting with some guidance as to how the HTB scheme works.
When you submit your HTB application, and once this application has been approved, you will then receive the Authority to Proceed (ATP) which is, effectively, the loan or mortgage offer.
This is valid for a period of 3 months from the date of issue and will need to be renewed if contracts aren’t exchanged during this period.
During the 3-month period, your solicitor or conveyancer will need to:
- Ensure the legal documentation from the developer is acceptable to HTB
- Explain the HTB loan to you as well as your legal responsibilities
- Arrange for the necessary documents to be signed
Once the above have been completed, your solicitor will ask for permission from HTB to proceed to exchange contracts – also known as the Authority to Exchange (ATE).HTB do not advise that you apply for your repayment mortgage until you have your ATP, so you will need to ensure that your repayment mortgage offer is made available to you during this 3-month period too.
Once the ATE has been issued, this is valid for a period of up to 28 days and will need to be re-requested if exchange of contracts does not happen within this period.
What documents need to be sent to HTB?
Before HTB can issue the ATE they will need:
- The request from your solicitor via the Form 1 – this provides confirmation that all the legal documentation is in accordance with the HTB guidelines, so cannot be carried out until full replies have been provided.
- ID documents – your solicitor or conveyancer will arrange a suitable time to verify your ID.
- First Time Buyers Declaration – this will be explained to you by your solicitor or conveyancer.
- UK Finance Disclosure Form – to be provided by the estate agent.
- Your mortgage offer and valuation report.
- Source of funds information – i.e. your bank statement showing where the funds you are contributing towards the purchase are coming from/currently held.
As you can see, there are a lot of documents that need to be submitted to HTB in order to obtain the ATE!
I have been told the property is to be completed at a future date – how can I plan ahead?
Often with new build property, the completion of your purchase actually takes place in the future once the property is structurally complete, and you so you are purchasing ‘off plan’. There is a difference between the estimated completion date and the contractual ‘long stop’ date. The long stop date is the date the property is contractually required to be complete by – this is common in new build contracts to protect the developer against any unforeseen delays. What this means is that, although they are hoping to be able to complete the build by the estimated date, there is some flexibility should they be unable to achieve this.
If the property is not complete by the long stop date, then you may be entitled to pull out of the contract, in which case your deposit would be returned to you.
You will need to factor the HTB timing, as set out above, into any purchase you are making ‘off plan’ and with the benefit of the HTB scheme. Your solicitor or conveyancer will be able to guide you here.
We will soon be providing Part 2 of our guidance for first time buyers, which will cover the things you can do to streamline the process of purchasing your new property. Stay tuned!
For further information, please don’t hesitate to contact our New Build Real Estate team.