MortgagesPersonal Finance

Buy Your First Home Sooner With Government Support

Agent handing over keys to new home owner

You probably already know that there are a number of different schemes for people who want a hand up onto the housing ladder. The government want to support people in buying their first property, so they’ve set up several different initiatives to give first-time buyers a boost.

One popular option is the Lifetime ISA, or LISA. With a LISA, the government pay out a 25% bonus on your savings – money which can be used towards a house deposit or saved until retirement. With average interest rates not even reaching 1% at the moment, this is a great opportunity to boost your savings far beyond what any bank might pay you. It’s not right for everyone, though, and today we’re going to look at a couple of other government support schemes to help you fast-track your home ownership dreams.

Help to buy equity loan

Not to be confused with the now defunct help to buy ISA scheme, this is an opportunity to get a low interest loan that can be used towards the cost of your deposit. The big catch here is that the home you buy has to be a new build and cost under £600,000 in England or £300,000 in Wales. While that limits your options somewhat, for many people it won’t be a dealbreaker – and it may well match with your existing property goals.

Women drinking from mug. Surrounded by packed boxes for moving home

To qualify for the loan, you’ll need to raise a deposit of 5% of the purchase price. The government will then provide you with a loan for 20%, giving you a total of 25% for your deposit. For Londoners, the loan amount goes up to 40%.

After five years, you’ll start to pay a fee on the loan, which starts at 1.75% and rises every year in line with the retail price index. After 25 years (or when you sell the house if sooner), you’ll be expected to pay the loan back. The amount that you repay is calculated based on the current value of your house, not how much you paid for it. That’s because the loan is repaid based on the percentage borrowed, rather than the amount.

In order to take out this type of loan, you’ll need to speak to a Help to Buy agent. They’ll be able to explain the loan in full detail, including all of the associated costs, and help you work out if it’s suitable for your needs.

Shared ownership

The alternative option is shared ownership, which involves buying a portion of your home and renting the rest from your local housing association. The shared ownership scheme is only available to households with a combined income of under £80,000 (£90,000 in London), but is slightly more flexible in other ways. That’s because it’s not only open to first-time buyers, but also to those who have previously owned a house or flat but can’t currently afford one. Look on the Share to Buy website for an idea of the properties that might be eligible.  

Happy couple signing a contract at office

You’ll need to take out a mortgage for 25-75% of the property’s value. The rest will be rented back to you by the housing association. This means that you’ll be paying both rent and a mortgage, so you need to think carefully about how you’ll budget for the costs.

If either of these schemes sound appealing, be sure to speak to a Help to Buy adviser. They’ll be able to explain the range of different options currently available – and can give information tailored to your individual circumstances.

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