With the pace that house prices are currently climbing, you can be forgiven for feeling there isn’t much of an end in sight. In fact, according to Nationwide, average house prices exceeded £260,000 in February this year for the first time. This is the highest growth rate in 17 years, since 2004. With statistics like these, entering the property market the prospect of owning your own home can feel pretty bleak. The government has implemented several schemes to assist buyers in finding their first home. One of these is the Help to Buy scheme which we covered briefly in our blog How to Save for a Mortgage Deposit. We have collated a quick guide below, covering everything that you need to know about the Help to Buy Government scheme.
What is the Help to Buy Government scheme?
Introduced on April 1st 2021, the new Help to Buy government scheme aims to support first-time buyers by lending up to 20% of the cost of a property in England. This can mean that a first-time buyer will only require a 5% deposit and a 75% mortgage. This proportion varies in different areas; in London the loan increases by up to 40% and in Scotland it is capped at 15%. This is called an equity loan.
There are some key points to consider regarding the Help to Buy Government Scheme including:
- It is available only on new build homes that have signed up for the scheme.
- It requires a minimum of a 5% deposit.
- It is interest-free for 5 years and can be repaid at any point over 25 years.
- From the 6th year, a 1.75% repayment is required on the equity loan, which raises annually.
- The total amount that you repay is reliant on the value of your home, at the point of repayment.
- There is a monthly management fee of £1 to pay whilst the loan is being paid off.
- It is set to run until 2023.
What are the regional property price caps?
The old Help to Buy government scheme (which ran from 2013 to 2020) applied to both first-time buyers and homeowners, with a blanket cap of £600,000. The current Help to Buy Government scheme, however, is only available to first-time property buyers and has regional maximum property price caps. These vary from region to region where property prices differ:
- East – £407,400
- East Midlands- £261, 900
- London- £600,000
- North East – £186,100
- North West- £224,100
- South East- £437,600
- South West -£349,000
- West Midlands- £255,600
- Yorkshire and The Humber £228,100
What is the eligibility criteria?
To apply, a prospective buyer:
- Must be first time buyer
- Needs to be over the age of 18 with a good credit history.
- Cannot own a home anywhere in the world.
- Cannot be joint buyers if one has ever owned a property.
- Must not plan to rent out the property.
How do you claim the scheme?
Not all developments offer the Help to Buy government scheme. To find a home in your area that is under the scheme, look for a local Help to Buy agent on the government website. Or, Zoopla has this handy search tool to find homes in your area. Once you have found a home, you will be required to reserve the property with a £500 fee. Following this, you will need to apply for the scheme by completing a Property Information Form, which is then reviewed. Once authorised, you will be issued an Authority to Proceed document and your broker can begin the processing of purchasing the property on your behalf.
Help to Buy is a fantastic government scheme for those struggling to get on the property ladder. There are also other similar schemes available, such as Shared Ownership and Lifetime ISA. Have you bought a home with any of these schemes? We’d love to know how you found the process.