There are a number of government schemes available to help make the dream of home ownership a reality. Most of these schemes can be termed as ‘Help to Buy’, and many of them are specifically aimed at assisting first time homebuyers. The nature of Help to Buy schemes ranges from helping buyers save in order to build up a property deposit, to incentivising lenders to make mortgages more readily available.
The Help to Buy Scheme
The Help to Buy scheme was originally created by the government to enable the purchase of a home by those who do not have a large deposit but can afford the monthly mortgage payments.
The eligibility criteria for the Help to Buy scheme is that you must:
-Have at least a 5% deposit
-Be seeking to purchase a house which costs £600,000 or less
-Be buying a property you plan to live in as your main residency (not as a buy-to-let)
-Not have any share in another property
Reducing the minimum deposit frees up funds for other costs incurred by the property purchase process. This is likely to be your biggest purchase, and so it is crucial that you have a quality and experienced conveyancing solicitor for your move in order to ensure that the experience runs smoothly. At movelawyer.co.uk, we only partner with conveyancing solicitors who have been regulated by the Solicitors Regulation Authority (SRA) or the Council of Licensed Conveyancers. When you receive your quote from movelawyer.co.uk, you can rest assured that the conveyancers and conveyancing solicitors that we recommend are professional and experienced.
There are currently three Help to Buy schemes available, and they are detailed below.
Help to Buy – Equity Loans
Equity loans are available to both first-time buyers and existing homeowners seeking to purchase a newly built home in England costing up to £600,000. You fund 80% of the purchase; you must provide a deposit of at least 5%, and can take out a mortgage for up to 75% of the purchase price. The remaining 20% is covered by a government ‘equity loan’ which is free of interest charge for the first five years. From the sixth year, you’ll be paying a monthly administration fee on the loan which increases each year from the seventh year.
Help to Buy – Shared Ownership
You are eligible to buy a home through this scheme if your household earns £80,000 a year or less, and there are specific shared ownership schemes available for older people and those with long-term disabilities.
With the Help to Buy Shared Ownership scheme, you will be able to take out a mortgage to buy a share of a house – between 25% and 75% of the property’s value; the local housing association will own the remaining share of the house on which you will pay a proportional rent – this is usually around 3% of the LHA’s share of the property value. It is possible to buy further shares in the property at any time, but these share prices will be based on the market value at the time of purchase and you will have to pay for the valuation to be carried out. In order to increase your stake in the property, you will need a shared ownership mortgage; because you part-own the property, you will need a smaller mortgage and also a smaller deposit – 10% pf the share you are buying.
You are entitled to sell your shared ownership home at any point, and should you wish to do so when you own a 100% share, the housing association has right of first refusal. However, if you wish to sell your home when you own less than a 100% share of the property, the housing association has the right to find a buyer and 8 weeks to do so. The 8-week process will begin once the housing association receives your signed contract of sale, and this can only be completed once you have:
-Informed the local housing association that you wish to sell your house
-Paid the fees for a chartered surveyor to survey and value your home (your housing association will provide you with a list of recommended surveyors)
-Agreed with the housing association what your share of the house sale will be based on the valuation
-Included the details of your conveyancing solicitor who will be working on the sale
-Had all of the necessary parties sign the contract of sale – i.e. if you bought the property with someone else, they also need to sign
-Confirmed that an Energy Performance Certificate has been commissioned before you attempt sell your home.
If after 8 weeks, the housing association has not found a suitable buyer, you can sell your property through an estate agent or privately. If you use an estate agent, they will need to complete a shared ownership form to ensure that the potential buyer is entitled to buy your home.
Help to Buy – ISA
In order to be eligible for a Help to Buy ISA, you must be a first-time buyer who does not own any property anywhere in the world, and the house you wish to buy must cost up to £250,000 and be purchased with a mortgage.
This ISA allows you to save any amount up to £200 per month, and your savings will receive tax-free interest and a bonus of 25% from the government. The amount you need to have saved in your ISA before you can claim your bonus is £1,600 as the minimum government bonus available is £400. The maximum bonus you can receive is £3,000, and you will need to have saved £12,000 in order to do so.
A Help to Buy ISA account is available to each first-time buyer, not each household, so if you are buying with someone else, you could receive a government bonus of up to £6,000.
This ISA account can be opened by savers aged between 18-40 and allows you to save up to £4,000 each year towards your first home or retirement. Besides this yearly limit, your savings do not have a monthly minimum or maximum amount and will earn you a 25% bonus, just like the Help to Buy ISA. In the case of the Lifetime ISA, the bonus on your savings is paid every year until your 50th birthday, and the accumulated savings, interest and bonus can be used towards a deposit on your first home of up to £450,000.
If you want to find out more about the Help to Buy Scheme or if you’re looking to buy a home in the Midlands through a Help to Buy scheme, then have a look at the Help to Buy Midlands website.