The Help to Buy Scheme is a government initiative in the UK designed to assist first-time buyers and those looking to purchase a new-build home. Here’s an overview of how it works:
1. Types of Help to Buy Schemes
a. Help to Buy: Equity Loan
- What it is: The government provides an equity loan of up to 20% of the property’s value (40% in London). This loan is interest-free for the first five years.
- Eligibility: Available for new-build homes with a maximum purchase price of £600,000. You need at least a 5% deposit.
- Repayment: After five years, you’ll pay interest on the loan. You repay the loan when you sell the property or when the mortgage term ends.
b. Help to Buy: ISA
- What it is: A tax-free savings account where the government adds a 25% bonus to your savings (up to £3,000 on savings of £12,000).
- Eligibility: Available for first-time buyers saving for a deposit. You must be buying a property worth up to £250,000 (or up to £450,000 in London).
- Repayment: The bonus is paid upon completion of the property purchase.
c. Help to Buy: Shared Ownership
- What it is: Allows you to buy a share of a property (between 25% and 75%) and pay rent on the remaining share.
- Eligibility: You can buy a new-build or existing home, with maximum household income limits in place. You need a smaller deposit compared to buying outright.
- Repayment: You can buy additional shares in the property over time (staircasing), eventually owning 100% of the property if you choose.
2. Benefits
- Lower Deposit Requirements: Reduces the amount of money you need to save for a deposit.
- Government Support: Helps make homeownership more accessible for first-time buyers.
- Financial Flexibility: Interest-free loans and tax-free savings provide financial support.
3. Considerations
- Property Value Caps: There are limits on the maximum property value, which can vary by region.
- Repayment Conditions: For equity loans, interest starts after five years, and repayment is required upon sale or mortgage end.
- Eligibility Criteria: Each scheme has specific criteria that must be met.