How the Help to Buy Scheme Works


Recent figures from UK Finance show that the number of first-time buyers is at its highest for 12 years. According to the data, around 370,000 mortgages were given to new buyers in 2018, while research from Halifax shows that the majority of house purchases were made by those taking their first steps on the property ladder.

Although the removal of stamp duty (for properties under £300,000) has certainly had an impact, the sudden spike in first-time buyers has been largely attributed to one thing: the Help to Buy scheme. Reducing deposit costs and helping buyers to save faster, this government initiative has fuelled an influx of new property owners over the past few years.

But how exactly does it all work and how can it benefit you?

What is the Help to Buy Scheme?

The Help to Buy scheme is a government initiative designed to help first-time buyers save enough for a deposit on a house. First introduced in April 2013, the scheme has already helped over 420,000 people get themselves on the property ladder, with more than 1.2 million people opening up a Help to Buy ISA in that time.

Along with the hugely popular ISA, Help to Buy also includes the Equity Loan and Shared Ownership schemes, while there are also separate initiatives for people hoping to buy property in London, Wales and Scotland. Although each of these schemes has differing eligibility requirements, Help to Buy is predominantly aimed at first-time buyers looking to buy a new-build in the UK.

How Help to Buy Works

Help to Buy: Equity Loan

Through the Help to Buy Equity Loan scheme, the government will lend buyers 20% of the purchase price, so long as the property costs less than £600,000. Leaving you with a 75% mortgage, you only need to come up with a 5% deposit when buying through this particular initiative, which is obviously much more affordable than a typical 10% or 20% mortgage deposit.

Eligibility: anyone buying a new-build property under £600,000. If you’re buying in London, Wales and Scotland, you will receive an equity loan of 40%, 20% and 15% respectively.

Help to Buy: ISA

The Help to Buy ISA is dedicated to helping first-time buyers save enough money for a deposit on a house. Each buyer (not each household) can receive up to £3000 in government bonuses, as they add an additional 25% to any contributions you make and ultimately help you save much quicker.

You’re only allowed to save up to £200 a month (meaning you’ll receive an extra £50 each time), but you can make an initial payment of £1200 (which will entail a bonus of £300). However, you won’t actually receive these bonuses until you’ve saved £1600, so you’ll have to wait a couple of months to see the real benefits of this ISA. Once you’ve reached that minimum requirement, however, you’ll receive a lump £400 in your account.

Eligibility: first-time buyers purchasing a property under £250,000 (or £450,000 in London).

Help to Buy: London

Since buying property in London is so different to the rest of the country, there’s a Help to Buy scheme dedicated to buyers in the capital. Functioning in much the same way as the standard Equity Loan scheme, those buying in London will receive a loan of 40%, leaving them with a 55% mortgage and a 5% deposit to pay.

Eligibility: all new-build properties under £600,000, both first-time buyers and existing homeowners.

Can You Get Help to Buy on Old Houses?

The Help to Buy Equity Loan and ISA schemes are only applicable to new-build homes. Therefore, if you’re hoping to buy an older property, you’d be unable to take advantage of the government bonuses and 20% loan.

However, the Help to Buy Shared Ownership scheme can be applied to both new-builds and existing homes belonging to the local housing association. Perhaps not as popular as the other government initiatives, Shared Ownership applies to first-time buyers and existing homeowners who can’t afford to buy a property outright.

Instead of purchasing the entire property, this scheme involves buying between 25% and 75% of the home, and then paying rent on the remaining percentage. Although you still need to come up with a 5% deposit, you only need to come up with 5% of what you’ve bought, rather than the property’s overall value.

When Does Help to Buy End?

The current form of Help to Buy is available until 2021, although those hoping to open a Help to Buy ISA must do so before 30th November 2019. From April 2021, the scheme will only be available to first-time buyers purchasing new-builds and new price caps will be set. This is set to run up until 2023, when the government is due to launch a brand-new initiative similar to the current Help to Buy setup.

Can You Use Help to Buy Twice?

Unfortunately, the Help to Buy scheme can only be used to purchase one property. However, the Help to Buy ISA applies to each buyer, rather than each property. So, that means each person named on the mortgage can each receive government bonuses of up to £3000, effectively doubling the benefits of this hugely popular initiative.

How to Find a New Property

Whether you decide to go through the Help to Buy scheme or not, finding a new property always takes time. After all, this is potentially one of the biggest investments you’re ever likely to make, particularly if you’re a first-time buyer looking to climb the property ladder. Fortunately, we currently have a wide range of property developments for sale, so you can always start your search right here with Blackmore Homes.

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