There are two current main ‘Help to Buy’ schemes in England. These are Shared Ownership and Equity Loans. Other Help to Buy schemes include Help to Buy ISAs (launched in December 2015 and not available to open after November 2019) and the Help to Buy Mortgage Guarantee (finished at the end of 2016). Read on to find out more about who is eligible for these schemes, and what benefits they provide to first-time buyers.
Help to Buy: Shared Ownership
The Help to Buy Shared Ownership scheme is offered to first-time buyers who:
● Have no outstanding credit issues; and
● Have a total annual income of £80,000 or less (£90,000 or less if living in London).
Those who are eligible can buy a share of a property and pay rent on the remaining part, and accumulate a bigger share of the property as time goes on. The property does not have to be a new build, but does have to be registered with this scheme.
You should speak to a qualified professional to decide whether the Help to Buy Shared Ownership scheme is appropriate for your circumstances.
Help to Buy: Equity Loans
● Over the age of 18; and
● Buying a new build property of value less than £224,400 (North-West of England); and
● Not renting out the property they buy; and
● Can afford to put down a 5% deposit; and
● Have arranged a repayment mortgage of at least 75% LTV.
For those eligible, the government will provide a loan to put towards the purchase of the property. The loan is repaid and will include a share of the capital appreciation of the property. A monthly fee of £1 is paid by direct debit and a reservation fee, stamp duty tax, legal fees and mortgage fees will also need to be paid as usual.
Other features of Help to Buy Equity Loans:
● No interest is paid on the loan for the first five years;
● After the first five years, interest will be charged monthly at 1.75% and this rate increases each year;
● The loan can generally be paid off in part or in full at any time (part payments of at least 10%); and
● The scheme is not available for all new build properties so buyers should ask the developer for details.
You should speak to a qualified professional to decide whether the Help to Buy Equity Loan scheme is appropriate for your circumstances.
Help to Buy: ISAs
The Help to Buy ISA scheme was offered to first-time buyers (before November 2019) who saved at least £1,600 in their ISA. The government pays a bonus of 25% of the savings in the ISA, up to a total of £3000. The scheme is still open to those who already have an ISA, but new Help to Buy ISAs can no longer be opened.
Examples of Help to Buy ISA bonuses:
● Savings of £1000: No bonus can be claimed, amount saved does not meet the threshold.
● Savings of £2000: Bonus of 25% (£500) can be claimed.
● Savings of £5000: Bonus of 25% (£1250) can be claimed.
● Savings of £12,000: Bonus of 25% (£3000) can be claimed.
● Savings of £20,000: Maximum bonus of £3000 can be claimed.
Please note that this article is to be used for guidance only. Above are illustrations; you will need to speak to a qualified professional to find out what your Help to Buy ISA bonus will be.