To understand why the help-to-buy scheme is the best option for first-time buyers, here is an explanation of what the scheme is and what those who buy via it stand to save.
What is the Help to Buy Scheme?
The Help to buy scheme operated within the UK is a government created scheme which provides UK citizens with a viable and affordable means of purchasing a first-time home.
Who is Eligible?
The scheme is only offered as a means of helping and enabling first-time buyers to purchase a property; those who have previously or currently own property may not apply.
Why Was the Help to Buy Scheme Set Up?
The help to buy scheme was created specifically to assist and enable first time buyers who are otherwise unable or unlikely to be able to ‘get on the property ladder’.
Why Buy via the Help to Buy Scheme?
When purchasing a home through the Help to Buy scheme, the UK government offers those eligible a range of financial assistance and support that is not provided to those who opt to buy outside of the scheme. Not only do the options open to those who buy via the help to buy scheme save most a considerable amount of time and even money, many of those who buy via the Help to Buy scheme would not be able to buy at all, or at least not for a number of years, if at all without it.
Help to Buy Isa
The Help to Buy ISA involves the UK government paying those seeking to buy for the first time with a 25% bonus on their existing savings up to the amount of £3000 in order to help individuals afford a property. Because a Help to buy ISA is taken out by an individual this means that those looking to buy as part of a couple can each take out a help to buy ISA and combine their savings in order to purchase a single property together.
The ISA is available to first-time buyers who are hoping to purchase a property within the UK that costs up to £250,000 outside of London or up to £450,000 within London and live there (rather than rent it out). Finally, the amount provided by the government is not a loan and consequently does not need to subsequently be paid back.
Help to Buy Equity Loan
Help to Buy Equity loans were created in order to support and help first-time buyers afford the deposit on their first property purchase. Help to buy equity loans are only available to individuals (not couples) who intend to purchase a new build property, live within the property (rather than rent it out) and are looking to purchase a property which costs £600,000 or less, unless an individual is looking to buy in Wales in which case the upper limit as to the price of a property stands at £300,000.
To qualify for a help to buy equity loan, a first-time buyer must further be able to pay 5% of a property’s value as a deposit on a property. Meanwhile, the government will provide up to 20% (this rises to 40% when buying property in London). Then, a first-time buyer is required to take out a mortgage of up to 75% (or up to 55% in London).
Finally, a help to buy equity loan can only be taken out to buy properties which are bought from a builder already registered with the Help to Buy scheme. Consequently, when hoping to buy via a Help to Buy equity loan, you must ask your agent to view properties on their Help to Buy list. Alternatively, you can also search for an agent who can provide a list by using the Find Your Local Help to Buy Agent tool featured on the official Help to Buy website.
Help to Buy Shared Ownership
The Help to Buy scheme does not just assist and enable those who wish to or are able to purchase an entire property of their own; the UK government has made provisions to permit those financially unable to buy their entire property by instead offering a means of buying from as little as 25% to as much as 75% of a property. Then, a person living within said property need only pay rent on the remaining portion of the property, or that which they do not own themselves.
Help to Buy shared ownership can be applied for by anybody who earns less than £80,000 a year as a household outside of London and those living within London who as a household earn below £90,000. Further, it is not only first-time buyers who are eligible to apply for shared ownership but those as well who have previously owned property but cannot afford to currently do so. By definition then, shared ownership properties are always lease hold properties. That said, both new and existing builds are able to be bought as part of the shared ownership help to buy scheme.
Hence, and in summary, those looking to buy for the first time are afforded via the Help to Buy scheme a number of ways through which to own property meaning that Help to Buy is almost always the best and most financially sensible means of buying a first-time home.
