Help to Buy: Here’s Everything You Need to Know

“Help to Buy” has been splashed across newspapers and discussed on TV more than ever recently. The government-funded housing scheme has risen dramatically in popularity and is not showing any signs of slowing down. In April, Help to Buy will be five years old and 2017 was apparently its most successful 12 months to date!

Today, we’re going to discuss what exactly Help to Buy means and how you might be able to benefit. Remember: it’s not just for first-time buyers!

So what exactly is the Help to Buy scheme? Well, it’s essentially a stepping stone provided by the government which can give you extra financial help in buying a home. There are many options within this scheme and which avenue you go down will depend on your personal circumstances. We will run you through the main few plans.

The different options available with Help to Buy

Help to Buy ISA

Firstly, a Help to Buy ISA has proved very popular over recent years. This kind of ISA is very similar to a typical ISA you may have put money into in the past, except its sole purpose is for saving cash to buy a property. You cannot use the money in your Help to Buy ISA for anything else! The benefit of this particular plan is that the government will “boost your savings” by a generous 25% on your completion date. It’s worth noting that you cannot use this bonus towards your deposit.

The catch is, you must have invested a minimum of £1,600 into your ISA before the government will give you a lump sum. This is because their minimum bonus is £400 (25% of £1,600). For example, if you have saved £3,000 and put this into a HTB ISA, you’ll get an extra £750 from the government to pay for your home.

You can calculate your potential government bonus on their Help to Buy ISA page using your total savings. To be eligible for a Help to Buy ISA you must:

  • Be over the age of 16
  • Have a valid NI number
  • Be a legal UK resident
  • Be a first-time buyer
  • Not have a separate active cash ISA within the same tax year

For the government bonus to be applicable, your new home must:

  • Be in the UK
  • Have a purchase price of up to £250,000 (or £450,000 in London)
  • Be the only home you are going to own
  • Exist as your sole residency
  • Be bought with a mortgage

You can also take on a Help to Buy ISA alongside the other schemes available from the government. Let’s discuss these further.

Help to Buy Scheme helps a young mother

Shared ownership

A Shared Ownership scheme is available under the government. This is particularly aimed at people who may not be able to afford a complete mortgage on a home, even with the Help to Buy ISA bonus included. Shared Ownership means you can buy a share of your home – between 25% and 75%. You’ll have to pay rent on the rest of the home and you can later buy bigger shares if you are able to. There are some factors required for you to be eligible for the scheme: your annual household income should be below £80,000 or £90,000 if you live in London. You should also fall into one of the following categories:

  • Be a first-time buyer
  • Used to be a homeowner but can no longer afford to buy a property
  • Or are already under the Shared Ownership scheme and looking to move

Equity loan

If you’re buying a newly built home, you can apply for an Equity Loan. In this case, the government will lend you up to 20% of your new property’s cost. This means that you will be required to pay a 5% deposit and apply for a 75% mortgage. And what’s more? An Equity Loan will not charge you fees for the first five years of owning the new home. So, for example, say you are looking to buy a £200,000 house. You’ll have to put down a 5% deposit of £10,000, acquire £150k (75%) through a mortgage and the government would lend you the remaining £40,000 (205).

You don’t have to be a first-time buyer to be eligible for the loan – your new home must not exceed a price of £600,000 and must be a new build. You also will not be allowed to sublet your new home or own any other property at the time of purchasing the new one.

Help to Buy helps an elderly couple

Help and advice from Martin Lewis

In particular, the country’s favourite finance expert Martin Lewis has taken to the TV (and Twitter) to give the nation some much-needed advice. According to Google, Martin Lewis is the most searched man in Britain and we can’t say we’re surprised. His information is concise, easy to understand and most of all, relatable. We recommend visiting Martin’s website for guides and advice on all topics from buying a new home to signing a mobile phone contract!

Towards the end of January, the money saving expert recorded an episode of his TV show dedicated to Help to Buy ISAs and LISAs. He also invited Twitter users to join in the conversation and ask any questions using the #MartinLewis hashtag.

This particular quote, on the two deposits needed for buying a house, is very useful: “The most important thing to say is that you usually use the SAME money for both deposits. Many were worried they’d have to find two different deposits”. Check out this tweet for the rest of the advice.

Remember…

We think the most important thing to remember is that you don’t have to be a first-time buyer to qualify for the Help to Buy scheme. Yes, some of the plans are suitable for first-time buyers but there are plenty of options for existing homeowners. You can’t be eligible if you’re buying a second property (as in, you will own two houses simultaneously). However, the scheme generally is there to help anyone who is struggling to buy a house – whether it’s your first step on the property ladder or you’ve been in the game for years! There are also additional options for disabled and elderly people so make sure you check out the government website for more details.

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