The standard amount of deposit generally required to purchase a house is 10% of the purchase price. When you’re a first-time buyer, this can be a huge and daunting figure to even consider saving for.
Under the Help to Buy Scheme, introduced by the Government in April 2013, home buyers can purchase a property with just a 5% deposit. The scheme was originally supposed to run until 2021. However, the government has confirmed it will extend the Help to Buy equity scheme to 2023 but with additional restrictions.
First things first: start saving
Set aside money every month to put towards a deposit. There are different types of savings accounts specifically designed to help save for a deposit, such as Lifetime ISAs and Help to Buy ISAs.
Check you qualify for the scheme
You cannot use the scheme to buy a second home or property to rent out. If you are not a first-time buyer, your current house must be sold either on the same day as your new purchase or prior to completion of your new purchase.
Start house hunting
You will have an idea of the price of house you can afford. Under the Help to Buy Scheme, the purchase price must be no more than £600,000. It is also only available for new build houses and flats.
Apply for the equity loan
This is where the government lends home buyers money to buy the home they want. You can borrow up to 20% of the purchase price interest free for the first five years. If you live in London, you can borrow up to 40%. Take advice from a Help to Buy agent in your area or a local developer who is registered with Help to Buy.
The term of the Help to Buy loan is 25 years, but this can be repaid earlier either upon sale of the property, from savings or by remortgaging. You will start to pay interest on the Help to Buy loan from the sixth year of the term.
Take financial advice
While the government will loan you 20%, you will need a 5% deposit, and then a mortgage to make up the remaining 75% of the purchase price. (55% in London.) Speak to a specialist broker for new builds and Help to Buy who will assist you in finding the most appropriate mortgage for you.
Reserve your plot
Once your finances are all in order, and you have found a development site you like the look of and how the houses will look, construction of your house will begin and before you know it you will be living in a brand new home built just for you.