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Are you a first-time buyer interested in the Help To Buy Scheme? Green and Green are here to help you.
How to Get Help to Buy Your First Home
The Help to Buy Equity Loan scheme helped home buyers buy a new house by subsidising their deposit with an equity-based loan. Unfortunately, if you live in England the scheme ended in 2023 (it’s still running in Wales - we’ll talk more about that in a minute).
But the Help to Buy scheme isn’t the only way to get help buying a new home.
If you chat with a mortgage adviser, they’ll be able to let you know if there are any schemes you’re eligible for. But some schemes need a bit of planning in advance, so if you’re thinking about buying in the next few years and you want to make the most of any assistance you can get, you’ve come to the right place.
Lifetime ISA
If you’re saving for a deposit, a Lifetime ISA (or LISA, or Lifetime Individual Savings Account to use its full title) should be on your radar.
You can save up to £4,000 a year, and when you close it the government will add 25% to what you’ve saved. So if you put in £4,000 a year over ten years, you’ll have saved £40,000 towards your deposit and get a £10,000 bonus. Not bad, right?
But there are some catches. And they can be pretty major, so it’s worth making sure you understand them.
First up, you only get the bonus if you’re closing your Lifetime ISA to buy your first house (for less than £450,000) or to retire. Anything else - no bonus.
Secondly, there’s a penalty for taking your money out if it’s not for a deposit or it’s before you’ve turned 60.
Thirdly, you have to open it between the ages of 18 and 39, and you can only pay into it until you’re 50.
As long as you’re okay with those restrictions, get a Lifetime ISA opened as soon as you can. If you’re planning on buying a house in a few years and you put as much as you can into it, you could see a nice little bonus to your deposit.
Shared ownership mortgage
Shared ownership is when you buy a portion of a house - currently between 10% and 75% - and pay rent to a housing provider (landlord) for the rest. It doesn’t mean you have to share the house with someone else.
You’ll need a smaller deposit and mortgage, but you’ll need to be sure you have enough income to cover both the mortgage on the bit you own and the rent on the rest.
Then in the future you can buy more shares in the house until you finally own it outright. This is called staircasing. As you buy more shares, the rent you pay will decrease.
As with any other scheme, there are a few key points to bear in mind.
You can use the shared ownership scheme on both new build and existing houses.
Your household income needs to be £80,000 or less (£90,000 if you live in London).
The deposit you need will depend on the cost of the home and the mortgage you want - it’s usually between 5% and 25% of your share of the house.
You can buy between 10% and 75% of the house at the start of the scheme.
But you must buy the maximum share that you can afford.
If you’re happy with the idea of shared ownership, and you can plan financially to own the house eventually, shared ownership can be a great way to get onto the housing ladder.
Help to Buy - Wales
Although Help to Buy has closed in England, if you’re buying a house in Wales you can still use it.
It lets you borrow up to 20% of the house value (as long as it’s worth less than £300,000 in total) as an equity loan, which you can then use as part of your deposit.
That means you get access to 75% mortgages, which generally have significantly lower interest rates than the 95% mortgages you’d be looking at otherwise.
Of course, there are a few more points to bear in mind.
You have to be buying a brand-new house from a seller that’s signed up to the scheme.
You’ll still need a 5% deposit.
It’s an equity loan, so it can go up (or down) with the value of your house.
You’ll need to get a mortgage for the rest of the value of the property.
The loan is interest-free for five years. In the sixth year it is 1.75%. This increases annually by the consumer price index (CPI) plus 2%.
So which is best for me?
The trouble is, when you’re buying a house there’s no ‘one-size-fits-all’ solution. Your situation is different to everybody else buying a house.
That said, if you’re a way off buying your first house and you’re eligible there are few downsides to opening a Lifetime ISA. Pay in as much as you can afford over the next couple of years and you could get a nice little helping hand from the government.
If you’re not sure whether the other schemes are right for you then the best thing you can do is speak to a good independent mortgage adviser. They’ll be able to chat through your options and help you decide what’s best for you and your future plans.
Couldn’t recommend enough
James helped me with my first ever mortgage, buying my first house with my girlfriend and couldn’t recommend enough. I have been in contact with him almost daily since and has gone above and beyond what he needed to do for us!
Adam Rooks
James was excellent from start to finish
A smooth, fast process which I couldn’t recommend more. He went above and beyond to ensure we got the best mortgage and life insurance cover, he was professional and efficient always keeping us up to date. He was so helpful and really easy to communicate with, always getting back to us straight away. Thanks again James!
Grace Tinkler
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