A Complete Guide to the Government’s Home Buying Schemes

Getting a foot on the property ladder is no easy feat. With the average deposit in the UK coming in at £25,588, many people are left stunned as to how they will ever scrimp and save to secure such an amount of cash. Knowing the struggle in the UK, the Government has a number of schemes in place to allow people to buy their own homes.

Right to Buy

Before May 2015 council tenants had to have lived in their property for five consecutive years before being considered eligible to buy it. Now you only need to have lived in your council home for three consecutive years before being able to buy it. The maximum discount on your council property in London is £110,500 and £82,800 for any other location in England. Get in contact with your local council’s housing department to get the ball rolling.

Help to Buy Equity Loan

The Help to Buy scheme came to life in 2013 and is available for first-time buyers and homeowners looking to move. The scheme enables buyers to only put down a 5% deposit on a property.

Originally, back when Help to Buy was launched, the scheme was split into two parts; Equity Loan and Mortgage Guarantee. However, the Mortgage Guarantee – this was a Government guarantee offered to mortgage brokers to encourage large loans – was scrapped in 2016.

What remains today is the Help to Buy Equity Loan. You can put down a 5% deposit on a property and the Government will offer an interest free loan of a further 20%. Therefore, you will need the remaining 75% covered by a standard mortgage.

Property price£300,000
Deposit 5%£15,000
Help to Buy Equity Loan 20%£60,000
Remaining amount to mortgage£225,000

 

Help to Buy London

If you are buying in London or Greater London, your Help to Buy Equity Loan maximum amount is increased from 20% to 40% as house prices are much higher.

Property price£550,000
Deposit 5%£27,500
Help to Buy Equity Loan 40%£220,000
Remaining amount to mortgage£302,500

Regardless of what Help to Buy Equity Loan percentage you will be receiving the loan is only available on some new-build homes and the loan is interest free for five years only. You will need to pay back the Equity Loan and your mortgage.

Starter Homes Scheme

Starter Homes, according to the Government, will be for first-time buyers aged between 23 and 40. Buyers will receive a minimum market price discount of 20%. Therefore, if a property was worth £200,000 it could be bought for £160,000. The Starter Homes scheme can only be used on properties valued at £250,000 or under (or £450,000 or under in London).

However, for this to become reality the Government will need to put their plans in to action. Starter Homes were first brought to light in 2015, with the goal for properties to be completed in 2018. However, not one starter home has yet been built.

Shared Ownership

To qualify for Shared Ownership your household income will have to be less that £90,000 in London or £80,000 in the rest of the UK. Both new-build and older properties are available via Shared Ownership and each local area will have a Housing Association which can help you.

With Shared Ownership you purchase a share in a home from your local Housing Association or via a property development company which offers the scheme on their properties. You purchase between 25% and 75% of the house and an affordable rent on the part you don’t own.

As time goes on you are welcome to buy more and more shares in your property until you own it outright.

Help to Buy ISA

Rather than focussing upon the property itself, a Help to Buy ISA focuses upon first-time buyers’ savings towards a home. You can open a Help to Buy ISA from a number of different banks and building societies and begin saving immediately.

You can save a maximum of £200 per month into your Help to Buy ISA. For every £200 the Government will give you a further £50. That maximum bonus from the Government is £3,000 which equates to having £12,000 saved in your ISA – which would take 5 years.

The Help to Buy ISA can be used on properties up to £250,000, or £450,000 in London.

However, if you want to invest in a Help to Buy ISA make sure you open an account by 30th November 2019 – all new applicants will be denied after this date.

Lifetime ISA

The Lifetime ISA has two purposes; to save for a first property and to invest for retirement. Holders of a Lifetime ISA are welcome to use their account for both.

The ISA allows savers under 40 and above 18 to receive a tax-free cash boost. For every £1 saved the Government will add a bonus 25p. Therefore, if you saved the bonus of £4,000 during the tax year you would receive £1,000 as a bonus from the Government.

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