Help To Buy – an overview

If you’re struggling to get on the property ladder there are a number of government schemes designed to give you a leg up.

In this article, we look at the various options available to you, depending on whereabouts in the UK you reside.

Help To Buy – Equity Loans

Help To Buy England

With this scheme, the government can lend you up to 20% of the cost of a new build property (only from approved developers). The government will then share any increase or decrease in the property’s value over time.

Need to know

• The property must be your permanent residence

• It must also be your only property

• You will need to put in a cash deposit of at least 5% and then a mortgage of up to 75% to make up the rest

• You won’t be charged fees on the 20% loan for the first 5 years

• The maximum purchase price for this scheme is £600,000.

When you sell the property the amount you will need to repay will include a share of any capital appreciation that has occurred.

After the first 5 years, you’ll pay interest of 1.75%. This rate will rise annually to match the Retail Price Index (if it rises) plus 1%.

Help To Buy London

Because of the higher property prices in Greater London, the upper limit for the equity loan was increased in Feb 2016 from 20% to 40% for buyers in this area.

Help To Buy Scotland

Help to Buy Scotland is a similar scheme to the one that runs in England. The maximum value of the equity loan is 15% of the property purchase price with your deposit and mortgage making up the remaining 85%.

The maximum property value is £200,000.

Under this scheme, if you take out an equity loan of 15% and then decide to sell, you’ll need to repay 15% of the sale price to the Scottish Government. Unlike the English scheme, there is no interest payment after 5 years.

You can buy back the shares in your property as and when you can afford it. This is known as ‘tranching up’ and you can buy a minimum of 5% shares each year.

Help To Buy Wales

A similar scheme is available in Wales for new builds with a maximum value of £300,000. Buyers are required to provide a minimum deposit of 5%, and the maximum equity loan you can be offered is £60,000. Existing home owners and first time buyers are eligible to apply for this scheme.

For the first 5 years, you will have to pay a monthly £1 administration fee. After 5 years, you’ll be charged 1.75% interest on the loan. This rate will rise annually to match the Retail Price Index (if it rises) plus 1%.

Help To Buy – ISA

The Help to Buy ISA is another scheme that can help boost your deposit if you’re saving for your first home.

When you buy your first property, the government will pay you 25% of the amount that have saved yourself, up to a total of £3,000.

If you break this down, it means that for every £100 you manage to save into your Help To Buy ISA, the government will top it up with a further £25.

The minimum bonus is £400, so you need to save £1,600 or more before you can claim anything.

***New Help to Buy ISAs are only available until 30 Nov 2019. If you open an ISA before this time, you won’t need to close your account and your savings won’t be affected.***

Help To Buy – Shared Ownership

Under the Shared Ownership scheme you can buy a share in a property and pay rent on the rest. This is suitable for people who want to get on the property ladder but can’t afford the full property purchase price. Over time, as your affordability increases, you can buy a bigger share of the property. This is known as ‘staircasing’.

Need to know

• To be eligible for this scheme, your household income must be less than £80,000 (less than £90,000 if you reside in London).

• This must be your sole property

• You must have no outstanding credit issues

• Properties that can be purchased in this way are often Housing Association stock – they may be new builds or resales of shared ownership properties.

For more information on these, and other government schemes, visit here.

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