Confused About the Help to Buy Schemes?
Whilst it is widely accepted that there is a national housing shortage, the Government has launched several schemes over the years. These have been under the “Help to Buy” banner, designed to get people onto the property ladder.
Unfortunately calling all the schemes Help to Buy has caused confusion amongst consumers! Here’s my take on what’s out there right now.
Schemes Currently Available
Help to Buy ISA
This is a savings scheme available from most high street banks aimed to help first-time buyers with their deposit. If you meet the criteria, your savings will be boosted by 25% by the Government. Your Solicitor will apply for this bonus at the end of the house buying process so somewhat bizarrely you can’t use the bonus towards your deposit as it’s paid shortly after completion.
Help to Buy Equity Loan
This is the most popular scheme and is available on new build properties only. You will have seen houses being built all around Hull and Beverley. The Government will lend you up to 20% of the purchase price. Usually, my customers put down a 5% deposit and take out a 75% mortgage for the rest. Remember, it’s a loan not a gift and the Government have a stake in your new home until you pay them back.
Forces Help to Buy
If you’re in the armed forces, you can borrow up to 50% of your salary, up to a maximum of £25,000 interest-free towards a new home.
Some FAQs about the Help to Buy Schemes
What if I’m Self Employed?
There are lots of options available to you. It’s a good idea to get hold of your last SA302 from your Accountant and speak to a local mortgage broker for advice.
Do I have to buy a new build house?
Yes and no, the Help to Buy Equity Loan is for new build properties only. The Help to Buy ISA and Forces Help to Buy can be on new or old.
Do you need a good credit rating?
There may be options available to you even if you have a poor credit score. Mortgage lenders are becoming increasingly competitive on criteria and many challenger banks are entering the market. Again, please seek mortgage advice from a local expert!
How much deposit do I need?
A minimum of 5% as a rule.
Can my deposit be gifted by my parents?
Yes, family members and sometimes friends can gift (not a loan). This is a popular way for first-time buyers to get on the property ladder. It’s also popular for home movers moving to a bigger home. In a recent Government Survey, 27% of such buyers relied on family and friends to help with a deposit.
Do I need to pay the Government back?
Yes, with the Help to Buy Equity Scheme the Government loan is interest-free for 5 years. After this, you’ll pay fees. Hopefully, the property will have increased in value and you can potentially remortgage the property at any time. This likely would be to raise funds to increase your share. Remember, the Government will also receive their share of any profit made.
Is Help to Buy just for first-time buyers?
The Help to Buy Equity Loan and the Forces Help to Buy Scheme are for both first-time buyers and home movers. However, the Help to Buy ISA is designed specifically for those who have never owned a property.
How do I use the Help to Buy Scheme?
The first stage would be to have a free mortgage consultation. This is to work out your maximum borrowing and also to get a Mortgage Agreement in Principle Certificate. This puts you in a strong position to make an offer. Once you have this in place you’ll be a “Qualified Buyer”, the next step is to go and view houses!
For more information and further terms and conditions about any of the above schemes please refer to the helptobuy.gov.uk website.
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