Purchasing a home can be costly, and it is well documented that getting that first step on the property ladder can be especially difficult. However, there are various government schemes set up to help you on to that first rung. We look at the schemes available to you and how to use them to your advantage.
Help to Buy loan
The Help to Buy scheme is a popular scheme and is available on new build homes. It can be used by first time buyers, as well as homeowners looking to move to a new house.
With this scheme, you obtain a loan for a percentage of the purchase price. The loan is separate from your normal mortgage. You can borrow up to 20% of the purchase price (or up to 40% if you are buying in London). It is interest free for the first five years of the loan.
The Help to Buy loan scheme allows first time buyers to get onto the property ladder with only a 5% deposit. If you use this scheme, you will start paying the interest on the loan after the 5-year interest free period. You must pay the loan back either when you sell the house, or within 25 years of taking out the loan.
Help to Buy ISA
Another scheme which the government have introduced is the Help to Buy ISA.
This is a scheme to encourage first time buyers to save in a specially set up ISA. The ISA can be opened with any major bank or building society and, when you are ready to purchase your property, the government will pay a 25% bonus on whatever you have saved. This applies on savings up to £12,000.
You do not have to repay the bonus, but it must be used towards a property purchase. If you are purchasing jointly with a partner, and both of you are first time buyers, you can both have an ISA and claim a bonus to use on the same property.
Shared ownership is a scheme by which you purchase a percentage of a property. A Housing Association own the other share and you pay rent on the part that you do not own.
When buying your shared ownership property, you will usually purchase between 25% and 75% of the property. You can get a mortgage on a shared ownership scheme however special rules for the mortgage may apply. You must also make sure that you can afford the rent level for the remaining share alongside your mortgage payment.
In the future, you can then choose to purchase a larger share in the property and eventually own 100% of the property. This is known as staircasing.
Purchasing a home can be expensive. However, the schemes above are available to help first time buyers who may not otherwise be in a position to purchase a property.
If you are purchasing a property for the first time and would like to use one of the schemes above, our specialist conveyancing team can help. Call us today on 0800 988 7756 to discuss.