Phase 2 now released
A new home is the most expensive asset that most people will ever purchase and with 100% mortgages a thing of the past (except through a guarantor), the only realistic way for many homebuyers to get on the property market is with some assistance. The government is trying to ensure that people are not completely priced out of owning their own property, through a range of Help to Buy schemes to suit different circumstances.
Help to Buy: ISA
To be eligible for a Help to Buy ISA you must be over 16 years old, a UK resident and a first-time buyer. Most high street banks and building societies are currently providing the scheme but to claim your bonus your solicitor must apply for it.
This type of scheme is suitable for people who are able to save money up for a deposit to buy their first home. The government will add 25% to your savings, which means for every £1000 you manage to save, they will contribute £250 to top your savings up. The maximum amount that they will boost your savings by is £3000, however, if there are two of you buying a home and you are both first-time buyers then you are both entitled the maximum £3000 each.
Lifetime ISAs are also available, which are suited to those who can save up larger sums than the £200 per month cap of the standard Help to Buy ISA. A Lifetime ISA (LISA) allows you to save up to £4000 each tax year with the same bonus percentage of 25%. Applicants must be between 18 and 39 and first-time buyers. The nature of LISAs is more complicated than the ISA, with the money often being invested in stocks and shares, so some banks do not offer this option.
Help to Buy: Shared Ownership
The shared ownership scheme is only available to households with an annual income of less than £80,000 (£90,000 in London). The scheme is mainly used by people who do not have a large deposit available to use, with this scheme deemed to be the cheapest way to buy your first home. It’s only available to first time buyers or people who formerly owned a home and cannot currently afford one through alternative methods.
When you can’t afford the full 100% mortgage of a home, you also have the option of a shared ownership. You can get between 25% and 75% of a home’s value and pay rent on the remainder of the share. The scheme is available for newly built homes or existing ones through housing associations and you also have the option to buy bigger amounts of shares in the home later on when you can afford it.
Help to Buy: Equity Loan
If you are looking to buy a new-build property through developers like Anwyl Homes and have 5% deposit, then you can apply for an equity loan from the government for up to 20% (or more for London based homebuyers). You then take a mortgage out on the remaining 75% (or less depending on the percentage of equity you lend). After five years you then start to pay interest on the equity loan and it is open to both first-time buyers and existing homeowners.
There are variations of this scheme, depending on which part of the UK you live in. To be eligible for a Help to Buy: Equity Loan in England, the property must cost less than £600,000 and Homebuyers in London can apply for a larger equity loan (up to 40% of property value) than other parts of the UK.
In Wales, there is a scheme called Help to Buy (Wales) which is available to homebuyers purchasing a new home priced up to £300,000, who have a minimum 5% deposit to put down. The Welsh government then provides an equity loan of up to 20% of the property value.