Getting help to buy

Getting “on the property ladder” is notoriously difficult and moving up it can also be quite a struggle.  (In fact, even downsizing can bring its challenges, especially if you are moving to a more expensive part of the country).  The good news is that there are some government-backed schemes which can make the challenge a bit more manageable.  Most of these only apply to first-time buyers, but there are some which are also available to those moving into their second or subsequent home.  Here is a quick rundown of the ones currently available.

Help to Buy ISA This scheme is only open to first-time buyers and is due to close its doors in November this year, but there are still a decent number of institutions offering it.  The basic idea is that you can save up to £12,000 yourself to which the government will add a 25% bonus up to a maximum of £3000.  If you are making a joint purchase then each purchaser can put their own Help to Buy ISA towards the purchase, so if you’re buying your first home as a couple, you could receive up to £6000 of help.  There is, however, a catch to the Help to Buy ISA which is that it can only be used for the actual purchase price of a home, it cannot be accessed to pay the holding deposit.

Lifetime ISAs The Lifetime ISA is only available to those aged over 18 but under 40.  You can save up to £4000 per year onto which the government will add a 25% bonus each year up until you reach the age of 50.  You can only withdraw this money to buy your first home or when you reach the age of 60.  The question of whether or not Lifetime ISAs should be used as a replacement for or supplement to pensions is a complicated one and ideally anyone considering it should take professional advice.  They can, however, be a useful way of putting together some extra cash to buy your first home.

Shared Ownership With shared ownership schemes you buy a share in a home and pay rent on the rest.  You may have the option to buy further shares in the home as your financial situation improves.  Shared ownership schemes are often associated with essential workers (such as those in the emergency services) and first-time buyers, but each scheme sets its own rules.  Shared ownership can lower the barrier to entry to buying your own home, but remember that you will not necessarily have the same degree of freedom you would have had if you had owned your home outright and, in particular, you will need to ensure that any future buyer meets the scheme’s criteria.

Equity Loans Equity loans are available to those buying second and subsequent homes (for their own use) as well as to first-time buyers, but they are only available on residential property.  The Help to Buy: Equity Loans scheme only operates in England.  Wales and Scotland have similar schemes known as Help to Buy – Wales and the Affordable New Build Scheme respectively which are both the same general idea but are implemented slightly differently.  In the English scheme, qualifying buyers are supported with a government-backed loan of up to 20% of the cost of a new-build home, buyers are expected to raise 5% of the purchase price themselves as a deposit and to get a mortgage for the rest.  This support can make it much easier for buyers to get a mortgage but there are a couple of important points to remember.  The first is that these equity loans are only interest-free for five years and the second is that the amount repaid to the government will depend on the value of the home at the time it is sold (or when you buy yourself out of the loan).  If your home increases in value, the government will take a share of this increase. Your property may be repossessed if you do not keep up repayments on your mortgage.