Help to Buy lowers the barrier to owning a home by allowing buyers to go ahead with a 5% cash deposit or even to purchase a percentage share of a property rather than the full amount. And it can also help with saving a deposit.
The scheme has been added to over the years with several options available depending on your circumstances. However, to break it down, Help to Buy basically comes in three different flavours.
1. Help to Buy: ISA
This is an obvious starting point for first-time buyers saving up a deposit. Help to Buy: ISA works like a regular ISA except the government will boost your savings by 25% by contributing a bonus up to a maximum of £3,000 depending on how much you save.
You can deposit anything up to £1,200 when you open the account (it can be less if you don’t have that much), then save up to £200 per month after that. Here’s a best-case scenario:
- You open an account and deposit £1,200.
- You save £200 per month (and receive a £50 monthly bonus on top).
- You build up a maximum of £12,000 in savings and get a £3,000 bonus to make a total of £15,000 towards your home.
However, there are a few ins and outs. Firstly, the minimum bonus is £400, so you have to save at least £1,600 to receive a bonus. Also, you can’t spend the government bonus on fees or the deposit due at the exchange of contracts. Your solicitor will apply on your behalf, and the bonus is added to the money you are putting forward to buy the house.
Help to Buy with a partner
The good news is that couples can both open a Help to Buy: ISA. This means you can pull in a combined maximum bonus of £6,000 between you rather than £3,000.
How to apply for Help to Buy: ISA
To benefit from this scheme, the property must be in the UK and be your only home – and purchased with a mortgage. You can use the first-time buyer ISA for properties up to £250,000 (stretching to £450,000 for London). Here’s a list of banks, building societies and credit unions offering the ISA.
2. Help to Buy: Shared Ownership
This can be a more affordable option for those struggling to find a property within their price bracket. The Help to Buy: Shared Ownership scheme allows homebuyers to own a percentage share of a leasehold property (between 25% and 75% of the home’s value). Owners would then pay rent on the remaining share, and can even buy a bigger percentage later on.
How to apply for Help to Buy: Shared Ownership
To use the Help to Buy: Shared Ownership scheme, there are a few requirements you need to meet:
- Your household must earn £80,000 or less (£90,000 or less if you live in London).
- You must be a first-time buyer, someone who used to own a home but can’t afford one now, or an existing shared owner looking to move.
There’s also a restriction on the type of property. For shared ownership, you can either buy a newly built home available through the scheme or an existing shared ownership property that has come on the market because the owner has decided to move.
3. Help to Buy: Equity Loan
If you already have a small deposit saved up but you’re still falling short, the Help to Buy: Equity Loan could be the answer to landing the keys to a newly-built property.
If you’re buying a new-build, the Help to Buy: Equity Loan lends you up to 20% of the total cost, so you only need a 5% cash deposit and a 75% mortgage to cover the rest. And you don’t need to pay any fees on the equity loan for the first five years.
For example, let’s say you buy a home worth £200,000. Your deposit would be £10,000, the government would loan you £40,000, and you’d be left with a £150,000 mortgage. If you then put the house on the market and it sells for £210,000, you would get 80% (your mortgage and cash deposit, which is now £168,000) and the government would take back their 20% (£42,000).
How to apply for Help to Buy: Equity Loan
The Help to Buy: Equity Loan is on the table for both first-time buyers and existing homeowners who want to buy a brand new home. The first step is to contact your local Help to Buy agent and discuss the options in your area.
Help to Buy London
As estate agents in and around East London, this is something we’re often asked about here at Keatons. Let’s clear up a few of the most frequently asked questions.
Help to Buy London is a variation on the Help to Buy: Equity Loan scheme – except the loan percentage increases from 20% to 40% and it’s available for new-builds up to £600,000 in value to account for the higher price tag of living in Greater London.
For example, let’s assume you want to buy a home for £400,000 through this scheme. You would need a deposit of at least 5% (£20,000), the government would loan you 40% (in this case, £160,000) and you would take out a mortgage for the rest (£220,000).
If you sell the house for £420,000, that would be split according to the percentages above. So, you would get £252,000 (your deposit and mortgage) and pay back £168,000. Just like the Help to Buy: Equity Loan, you won’t be charged loan fees for the first five years.
How to apply for London Help to Buy
As long as you meet the criteria and you’re not planning on subletting or buying the home as a second property, there’s a good chance you can apply to London Help to Buy. To find out more, head to helptobuylondon.co.uk.
If you’re looking for affordable homeownership in London or elsewhere in the UK, Help to Buy can give you a foot in the door. There are several schemes to choose from, whether you need help with saving a deposit or lowering the mortgage to bring everything within budget. There are also other variations available for homebuyers over 55, those with long-term disabilities and priority given to certain groups of people such as the military. Visit helptobuy.gov.uk for more guidance or contact firstname.lastname@example.org to register your interest in Help to Buy properties in East London.
See our full list of property advice articles in our Knowledge Centre.
Keatons has been based in East London for over 20 years and has since expanded to the north and south of the city. We have an outstanding Trust Pilot rating from customers and we are known for helping sellers and landlords achieve the best possible market price for their property. To find out more, visit www.keatons.com.