Help to Buy schemes

Longing to take that first step – or next move – on the property ladder? If you can’t afford the hefty deposit, using one of the UK Government’s house buying schemes may be a good option.

The Government’s schemes can help you buy a place with as little as a 5% deposit. There are four main schemes, three of which are Help to Buy:

  • Help to Buy: ISA, where the Government can top up your savings by up to £3,000.
  • Lifetime ISA, where the Government can top up your savings by up to £1,000 per year.
  • Help to Buy: Shared ownership, where you buy a share of your home (between 25% and 75%) and pay rent on the rest.
  • Help to Buy: Equity loans, where the Government lends up to 20% of the purchase price. This loan will need to be paid back after 25 years or once the house is sold (if this happens earlier), so if the value of the property has gone up in the meantime, the Government will make a profit.

How does Help to Buy work?

To be eligible for any of the Help to Buy options, or the Lifetime ISA, you and the house you’re looking to buy must meet several criteria – but it’s different for each scheme.

Help to Buy: ISA

ISA stands for Individual Savings Account. The Help to Buy: ISA is a savings account that you can use to save for your first home and the Government will boost your savings.

  • Save up to £200 a month and the Government will boost your savings by 25%. That’s a £50 bonus for every £200 you save.
  • The maximum bonus you can receive is £3,000. So, if you save £12,000, the Government will boost your total savings to £15,000.
  • You can open a Help to Buy: ISA until November 2019, but once you’ve opened an account there’s no limit on how long you can save for.
  • There’s no minimum monthly deposit – but you can save up to £200 a month (and make an initial deposit of £1,000 when you open the account).
  • Accounts are limited to one per person rather than one per home – so if you’re buying with someone, you can both open accounts and both receive a bonus.
  • You can only access the bonus after you’ve made the exchange on a house. However, speak to your solicitor about this – they may be able to negotiate an agreement with the seller. For example, if the seller requires a 10% deposit, they may agree to receive 8.5% at the time of exchange, and the remaining 1.5% shortly afterwards.

The criteria you need to meet include:

  • You must be a first-time buyer
  • You must be 16 or over
  • You must be purchasing property in the UK, and not own property anywhere in the world
  • The home you are buying can be up to £450,000 in London, and up to £250,000 in the rest of the UK

Lifetime ISA

This isn’t a Help to Buy scheme, but it’s still a government scheme that can help you buy your first home.

  • You can use it to buy your first home or save for your retirement.
  • You must be between 18 and 40 to open a Lifetime ISA, but you can save in it until you’re 50.
  • You can put up to £4,000 in per year and the Government will add a bonus 25%, up to a maximum of £1,000 a year.
  • If you have both a Lifetime ISA and a Help to Buy: ISA, you can only use the Government bonus from one for a house deposit. But speak to your bank or building society if this is a problem, as you may be able to transfer the balance from your Help to Buy: ISA to your Lifetime ISA.

To use your Lifetime ISA to buy a home, there are criteria:

  • The property can cost up to £450,000.
  • You must buy the property at least 12 months after opening the Lifetime ISA.
  • You must use a conveyancer or a solicitor for the purchase as the ISA provider will pay the funds directly to them.
  • You must be buying with a mortgage.

Shared ownership

The shared ownership scheme lets you buy a share of a home (between 25% and 75%) and pay rent on the rest. You pay for your share using your savings and/or a mortgage.

  • You’re eligible to buy a home through shared ownership if your household earns £80,000 a year or less (£90,000 a year or less if you live in London), and either:
    • You’re a first-time buyer
    • You were previously a homeowner, but you can’t afford to buy one now
    • You’re an existing shared owner looking to move
  • Shared ownership properties are always leasehold.
  • You have the option to buy more of your home at any point, once you own your initial share.
  • If you decide to sell your home, the housing association is given ‘first refusal’, meaning it has the right to buy it first. It also has the right to find a buyer for your home. If you own 100% of your home when you wish to put it back on the market, you can sell it yourself.
  • As well as finding a deposit and all the regular costs associated with home ownership, bear in mind that with shared ownership you’d also be responsible for service charges (if in a flat block) and regular rental payment.
  • 55 year olds and over can buy up to 75% of their home through the Older People’s Shared Ownership (OPSO) and are not required to pay rent on the rest.

Equity Loans

  • The home you buy must:
    • Be a new build with a purchase price of up to £600,000 in England (or £300,000 in Wales)
    • Be the only home you own
    • Not be sub-let or rented out after you buy it
  • You must purchase your home from a registered Help to Buy builder.
  • You’ll need a 5% deposit.
  • The Government will lend up to 20% (up to 40% in London).
  • You’ll need a mortgage of up to 75% for the rest (up to 55% in London).

With a variety of first time buyer and home owner mortgages available, make sure you read up on mortgages and compare mortgage deals carefully to find one that’s right for you.

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