In the current climate, many people see home ownership as an impossible dream. Trying to get a foot on the property ladder can be a real struggle. Many people are leaving university with a huge debt behind them and starting low paid, entry level first jobs. Being able to save enough money for a deposit is a common problem.
But the government has introduced a number of different Help to Buy schemes, all aimed at those struggling to buy their first home.
We’ve explained them all for you here, to try and help you navigate the maze.
Help to Buy: Equity Loan
This scheme is only applicable for new build homes, so if this is what you’re after, it’s definitely worth checking out the terms and conditions of the equity loan.
- You only need to find the minimum 5% cash deposit.
- The government will then lend you up to 20% of the cost of your home
- This gives you a 25% deposit on the purchase price of the property
- There will be no loan fees on the 20% loan for five years
- In the 6th year of the loan you will be charged a fee of 1.75% of the loan’s value.
- Following this, the fee will increase each year in line with inflation. The annual increase in the fees is worked out by using the Retail Prices Index (RPI) plus 1%.
- These fees do not go towards paying off the loan. However the larger the deposit you can put down, the more mortgage products you’ll have available to you and generally speaking, the bigger the deposit, the better the mortgage deal you’ll get.
Help to Buy ISA
This could be a good option for you if you’re not desperate to buy right now, but would like to start saving with a view to buy in the future. It acts as a savings account, but with a few added benefits.
- The government will boost your savings by 25%. So if you save £200 a month, the government will top it up by £50 a month.
- The maximum amount you can earn is £3,000, assuming you have saved £1,200 and this would take just over four years
Help to Buy Shared Ownership
Shared Ownership allows you buy a part of your house, which can usually be increased over time, until you gradually own the full house. This is a good way to get your foot in the door as the deposit amount is based on the share you buy, so it is much less – sometimes no deposit is required at all!
Lots of people decide that owning 50% of their home, for example, is still better than owning 0% if they continue to rent.
- You find the minimum 5% deposit of the purchase share (although some lenders will now accept a 0% deposit)
- You pay monthly rent on the remaining share of the home.
- You can usually increase your ownership share when you can afford to