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Help to Buy Explained

Help to Buy is an umbrella term for a number of Government-backed schemes designed to help people get on to the housing ladder. Find out more in In-Deed’s comprehensive guide, which explains the various schemes and who qualifies for them.

What is Help to Buy?

Help to Buy is an umbrella term for a number of Government-backed schemes designed to help people get on to the housing ladder. The schemes were devised to help first-time buyers and families who are priced out of buying their own home because of prohibitively high deposits and repayments. You don’t have to be a first-time buyer to benefit as some of the schemes are available to existing home owners. Find out more in In-Deed’s comprehensive guide, which explains the various schemes and who qualifies for them.

Help to Buy covers several different schemes that allow a buyer to purchase a home either with help on funding a deposit or through a shared ownership scheme. There are four current schemes that have guaranteed funding until 2021. They are Help to Buy ISA; Shared Ownership; Equity Loan; and London Help to Buy.

Several lenders now have higher loan-to-value mortgage products available independently of Help to Buy. Mortgage lending has eased significantly so it may be possible to get a loan of up to 95% of a property’s value without going through this scheme. This will give you a wider choice of lenders and you could get a better deal.

Help to Buy ISA

Available to anyone living in the UK, a Help to Buy ISA lets you save money into an individual savings account (ISA) through a bank, building society or credit union and the Government will boost your savings by 25 percent. So, for example, for every £200 you save, you will collect a bonus of £50 tax free. The maximum amount you can receive through a Help to Buy ISA is £3,000. However, if you are buying with a partner, he or she can also have an ISA and you could potentially benefit by up to £6,000.

Who qualifies for a Help to Buy ISA?

To be eligible for a Help to Buy ISA, you should be:

  • Aged 16 or over
  • Have a valid UK National Insurance number
  • Be a UK Resident
  • Be a first-time buyer who does not own a property anywhere else in the world
  • Not have another cash ISA active in the same tax year

Shared Ownership

When you cannot afford a 100 percent mortgage on a home, Shared Ownership allows you to buy a percentage share of a property (between 25 and 75 percent) and you then pay rent on the remaining share. You can buy the outstanding share when you can afford to. Both new-build properties and existing properties can be purchased in this way.

There are specific shared ownership schemes for people with disabilities and older people. Those with disabilities can buy through Home Ownership for People with Long-Term Disabilities (HOLD) where other home ownership schemes don’t meet your specific needs. When you’re aged 55 and over, you can get help from Older People’s Shared Ownership (OPSO), but OPSO only allows you to own a maximum of 75 percent of the property you buy. When you buy 75 percent, you do not pay rent on the remaining 25 percent. The housing association or developer will always retain that 25 percent, and when you sell a property through OPSO, you will only ever be able to sell the share you have.

Who qualifies for Shared Ownership?

Shared Ownership is available to first-time buyers and those who already have a shared ownership home. To qualify, your household must earn less than £80,000 a year if you live outside of London or less than £90,000 per household inside London. All Shared Ownership properties are sold leasehold. 

Equity Loan

With a Help to Buy Equity Loan, you receive a loan of up to 20 percent of the cost of a new-build home from the Government, so you only have to find a 5 percent cash deposit to buy. There are no loan fees charged on the 20 percent loan in the first five years of you owning the home.

Who qualifies for Equity Loan?

Equity loans on new-build homes valued at up to £600,000 are available to:

  • First-time buyers
  • Homeowners looking to move

London Help to Buy

London house prices are significantly higher than elsewhere in the UK. The London Help to Buy scheme will allow home buyers to receive a loan of up to 40 percent from the Government to buy a new-build home in a London borough.

Who qualifies for London Help to Buy?

First-time buyers and homeowners looking to move are eligible for the London Help to Buy scheme. The home must be a new-build and valued at up to £600,000. The home cannot be sublet or bought with a part-exchange on your current home. Nor can you own any other property at the time you buy with London Help to Buy.

Is conveyancing different with Help to Buy?

The short answer is no, the conveyancing process broadly remains the same. However, there are complexities involved in Help to Buy because you are dealing with third parties, such as the Government’s scheme administrators along with the seller. That means you should only consider instructing an experienced property specialist to deal with your purchase. All members of In-Deed’s nationwide panel are experts in preparing Help to Buy purchases and can advise you on eligibility criteria as well as liaise with the mortgage lender to ensure your transaction goes without a hitch.