Everything you need to know about the Government first-time-buyer and existing home owner schemes

03 Sep 2018

Struggling to get your head around all the Help to Buy schemes available? Well, you’re in luck. Here’s a quick overview of the Help to Buy purchasing schemes designed to get you onto the ladder.

Help to Buy Equity Loan Scheme

This government-backed scheme offers both first-time buyers and existing homeowners the option to take out a loan of up to 20% of the cost of their newly built home. This means that buyers will only need a 5% cash deposit, and a 75% mortgage to make up the rest. What’s more, you won’t be charged loan fees on the 20% loan for the first five years of owning the home.

Let’s take an example

If the purchase price of your new home is £200,000, here’s how the equity loan scheme would work:

The interest

The loan is interest-free for the first five years, and in the sixth year, you’ll be charged interest at a rate of 1.75%. When you sell your home, or the mortgage is paid off, you will have to repay the equity loan plus a share of any increase in value.

Eligibility criteria

There are a few circumstances in which you can’t apply for the Help to Buy Equity Loan scheme. For example:

• You can’t use the above schemes to buy a second home or a property to rent out.

• If you use Help to Buy, you can only take out a repayment mortgage.

• You can’t buy a property for more than the set price limits (see below).

Help to Buy Shared Ownership

The Shared Ownership scheme is designed to assist lower income household and first-time buyers onto the property ladder. You take out a mortgage on the percentage of the home you can afford (usually between 25% and 75%) and pay a low-cost rent on the remaining percentage. The benefit of this is that you only need to save a 5% deposit for the value of the percentage you’re purchasing.

Eligibility criteria

There are a few circumstances in which you can’t purchase a home via the Shared Ownership scheme. For example:

• If your household earns more than £80,000 per year.

• If you are able to purchase a home on the open market which suits your needs.

• If you already own a home and are not planning on selling it.

And… there you have it!

Everything you need to know about the government home-ownership schemes. If you’re not quite ready to buy, have a look at the government-backed saving schemes available, such as the ISA and LISA.

For more information, or to talk through your options, get in touch with the Radian Homes team. You can call them on 0800 145 6663 or drop an email to salesandlettings@radian.co.uk