Which help-to-buy Scheme Suits You?

Added on July 10th 2018

Many people want to get onto the property ladder but they have difficulty saving up the deposit. It’s such a common problem that the government has introduced several help-to-buy schemes to give wannabe owners a leg-up. There are quite a few to choose from and not all are suitable for everyone, so if you’re wondering which one is right for you, read on.

The help-to-buy ISA

This is a handy scheme for first-timers. It allows you to save up to £200 each month into an account and the government will top this sum up by 25%.

This ISA has a good interest rate – up to 2.53%– and then there’s the 25% bonus. You can deposit £1,200 upon opening the account.

On the downside, you’re limited to £200 each month and the sum can only be used for a first property of up to £250,000 in value. Another downside is that you receive the money upon completion, you can’t put it towards a deposit.

The help-to-buy equity loan

This scheme helps first-time buyers with a 5% deposit to get on the ladder. It’s only available for new-builds, but the government will lend buyers up to 20% of the property price and this loan is interest-free for the first five years.

The best things about this scheme are that you only need a 5% deposit and the interest-free nature of the government loan means your mortgage payments are lower for the first five years.

However, the government owns 20% of your property and you’ll need to pay back the loan when you sell the property.

Shared ownership

Shared ownership is for first-timers and for anyone else to buy into a property while continuing to rent it. This helps renters to build up equity with a view to buying somewhere outright eventually. You’ll need a 10% deposit of your share, as well as money to cover your mortgage fees and stamp duty. It’s only available to people earning less than £80,000 (£90,000 in London).

This scheme lowers rental expenses and people can buy between 25% and 75% of the property, with the option to buy additional shares later.

On the other hand, the housing association owns part of the property and the cost of additional shares may increase as years go by. You’ll be paying rent and mortgage, which can be more expensive and you’ll be restricted to housing association properties.

Starter homes

This scheme is for newbuilds only and it’s aimed at first-time buyers aged 40 and under. The properties can be sold at 80% of their market value, making them more accessible to first-timers. The properties must be valued at under £250,000 (£450,000 in London).

The advantages are obvious – there’s a 20% discount.

However, the properties must be newbuilds and once you’ve bought the property it can’t be sold at market rates for 15 years.

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