Getting onto the property ladder has become increasingly difficult over the years but the government-initiative has made homeownership more accessible and affordable. Launched in 2013, the "Help to Buy" scheme has helped thousands of people across the country to purchase their first home.
Naturally you will have questions about this government scheme and how the eligibility criteria applies to you. Below we have shared some frequently asked questions and useful information to help guide you through this process.
Who is eligible for Help to Buy?
The current scheme – which comes to an end in April 2021– is available to first time buyers as well as previous home owners. There are no rules regarding household income, all you need is a minimum of a 5% deposit and be looking to buy a new build home on offer for under £600,000, which is officially registered through the Help To Buy scheme. However as of April 2021 the restrictions will tighten and Help to Buy will only be available to first-time buyers purchasing newly built homes. The current restrictions for the Help to Buy scheme are as follows:
You can’t use the Help to Buy scheme to purchase a second property or a property to rent out.
You will be restricted to a repayment mortgage only if you use Help to Buy
How does Help To Buy work?
The scheme offers an equity loan where the government will lend you (first-time buyers and existing homeowners) money to buy a newly-built home. This only applies to properties under £600,000, in which you can borrow 20% of the purchase price interest-free. Note the interest free repayment is only for the first 5 years and is only applicable if you have at least a 5% deposit. For properties in London, they have upped the loan so you can borrow up to 40% of the purchase price. This reduces the upfront deposit cost, allowing many usually first time buyers to take that leap onto the property ladder where they would have not before been able to.
What's the Maximum amount I will need for a deposit?
Let's show an example in London for a help to buy backed property worth £600,000:
The government will provide up to a 40% loan : £240,000
A bank or building society will provide a mortgage for 55% : £330,000
You (the first time buyer) will need to provide a 5% deposit: £30,000
The lower the value of the property, the lower deposit amount you will need to provide.
When can I pay off the loan?
The majority of people aim to pay off a large proportion of the loan in the first 5 years, as that is the period where the repayments are interest free, after the 5 years you will have to start paying interest at 1.75%. However the government provides you with 25 years to pay off the loan in full. If you sell your property before then any outstanding loan will be repaid as part of the selling transaction. .
Would you like to view a ‘help to buy’ property? Enquire below to see what (development) has to offer.
It is always wise to check GOV.UK and talk to the Estate Agent before committing to a purchase to ensure you fully understand the process.