Personal Law

Home-Buying Schemes: The Help Available

Estimated read time: 3 mins

Carrie Tennick, February 18, 2021

For prospective new homeowners, there is a certain level of help available. The government has introduced home-buying schemes, such as Help to Buy, to fulfil its promise to make homeownership a realistic prospect for more people.

Most of the help available is for first-time buyers, as the intention is to give more people a step onto the housing ladder.

So what help is available if you’re looking to buy your first home?

Help to Buy

The Help to Buy programme was introduced in 2013, billed as the most significant government intervention in the housing market since the Right to Buy scheme was introduced.

It covered a variety of schemes, including the Equity Loan, Help to Buy ISA and mortgage guarantee. The ISA and mortgage guarantee have since closed to new applicants, with the ISA replaced by a Lifetime ISA, which can be used to save for a first home or for later life.

From April 2021, the Equity Loan scheme is being changed. It will include regional price caps in an attempt to let the scheme help the buyers who need it most. It means you can get a loan if your new home costs a maximum of:

  • North East – £186,100
  • North West – £224,400
  • Yorkshire and the Humber – £228,100
  • West Midlands – £255,600
  • East Midlands – £261,900
  • South West – £349,000
  • East of England – £407,400
  • South East – £437,600
  • London – £600,000

Equity Loan scheme

The Equity Loan scheme provides first-time buyers with a government loan, which you combine with your deposit and a mortgage to afford your home. You can borrow a minimum of 5% and a maximum of 20% (40% in London) of a new-build property – but you’ll have to make sure you buy from a homebuilder registered for the scheme.

You won’t pay interest on the loan for the first five years. Repayments are interest only, so will be a consistent amount. You’re able to repay part or all of the loan amount whenever you choose, but a part payment has to be at least 10% of your home’s value at the time of repayment.

At the end of the loan term, you’ll have to repay the loan in full. You’ll also have to pay it if you pay off your mortgage, sell your home or you don’t follow the contract terms and conditions.

Between its introduction in April 2013 and September 2020, a total of 291,903 homes were bought with an Equity Loan. These loans added up to £17.4 billion in value, while the value of the properties purchased was £79.2 billion.

Shared Ownership

If affording a new home isn’t possible without further help, a shared ownership property could be an option. With this kind of purchase, you buy a share of a property from its landlord – usually a housing association or council – and then pay rent on the remaining share.

You’ll need to take out a mortgage for the share you own. Your share can be between 25% and 75% of the full value. You can buy more shares of the home in time, which is known as staircasing.

To be eligible for a shared ownership purchase, your household must earn less than £80,000 (£90,000 in London) and you are:

  • A first-time buyer
  • A former homeowner who can’t afford to buy a home now
  • An existing shared owner

Consider your options

With the average property price continuing to rise – standing at a record high £252,000 in December 2020 – homeownership can be challenging for some. That’s why it’s important to consider all the help that might be available to you.

Once you’ve worked out the best way of affording your new home, you’ll need a top conveyancing team to get the deal done. Get in touch to find out how First4Lawyers can help.

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