In a bid to help first-time buyers onto the ever-changing property ladder, the government created the Help to Buy (HTB) schemes, which include HTB: Equity Loan and HTB: Shared Ownership and HTB: ISA. All three services and products were designed with today’s buyers in mind, giving everyone the chance to purchase their own home.
Here’s a breakdown of the three HTB products, to help you work out which one is best for you:
1. Help to Buy: Equity Loan
With a Help to Buy: Equity Loan, the government will lend you up to 20% of the cost of your newly built home, so you’ll only to contribute a 5% deposit and secure a 75% mortgage. The government don’t charge loan fees (interest) on the 20% loan for the first five years that you own your home, allowing you time to save more money towards paying the loan, or towards the deposit for another property in the future.
Cost of home - £200,000
Percentage of total
2. Help to Buy: Shared Ownership
If you don’t think you can afford a large mortgage to fund your own home, Help to Buy: Shared Ownership could be a great option for you. These schemes enable you to buy a share of your home – between 25 and 75 per cent – while paying a rental top up on the remaining share. This is a great option, offering more flexibility than renting, whilst growing equity in a property. It also offers you the opportunity to purchase larger shares (eventually all of them, in some cases) when you can afford to.
With HTB: Shared Ownership, you can buy a newly built home or an existing one through resale programmes from housing associations. You’ll need to take out a mortgage to pay for your share of the property’s purchase price, or fund this through your savings. Shared Ownership properties are always leasehold with the housing association.
Registering with your local Help to Buy programme will be a great starting point – you can see the kinds of properties available, whilst using online calculators to work out which scheme is most affordable. Alternatively, you can speak to Leaders’ Mortgage Services for free, impartial mortgage advice.
3. Help to Buy: ISA
If you are saving towards your first home, this scheme is a must. Help to Buy: ISA accounts are available to everybody and can be opened in a range of banks and building societies. You can start saving straight away, with an initial deposit of £1,200. From then on, all you need to do is save £200 per month to receive a 25% government top up. You can save up to £12,000 in your account, meaning you’ll receive an extra £3,000 from the government when you close your account. The minimum amount you need to save before the government will start applying your 25% bonus is £1,600.
When you are ready to purchase your property, you will need to close your Help to Buy: ISA and then instruct a solicitor to apply for your government bonus. Once they have received the bonus, they will add it to the money you are putting towards your first home. Unfortunately, the money cannot be used for the deposit due at the exchange of contracts, to pay for fees or any other indirect cost of buying your home – solely the cash deposit towards it.
If you’re currently exploring the various routes to purchasing a home, contact your local Leaders branch for further information on the products available.
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