What is the Help to Buy Scheme?
The Help to Buy scheme is a UK government-backed initiative designed to assist individuals and families in purchasing a home. Launched in 2013, the program aims to help people overcome the obstacles of saving for a deposit and securing a mortgage. By providing financial support, the scheme enables eligible buyers to own their dream home with a lower upfront cost.
Overview and Eligibility
The Help to Buy scheme is open to first-time buyers and existing homeowners looking to move up the property ladder. To be eligible, applicants must be at least 18 years old, have a good credit history, and be purchasing a property worth up to £600,000 in England or £300,000 in Wales. Additionally, the scheme is only available for main residences, not buy-to-let properties or second homes. There are no eligibility restrictions based on income or employment status, but applicants must demonstrate that they can afford the mortgage repayments.
It’s essential to note that the scheme is subject to regional price caps, and the government has set specific price limits for each region in England. These caps range from £186,100 in the North East to £636,000 in London. In Wales, the price cap is £300,000 across the entire country.
How Does the Help to Buy Scheme Work?
The Help to Buy scheme provides a government-backed equity loan of up to 20% of the property’s value (40% in London) to eligible buyers. This loan is interest-free for the first five years, and repayable when the property is sold or the mortgage is repaid. Buyers need to contribute at least 5% of the property’s value as a deposit, and secure a mortgage for the remaining 75% (55% in London).
Types of Help to Buy Schemes and Their Benefits
The UK’s Help to Buy scheme offers two primary options: Equity Loan and Shared Ownership. The Equity Loan scheme provides a government-backed loan of up to 20% of the property’s value, allowing buyers to secure a mortgage with a lower loan-to-value ratio. This results in lower monthly mortgage payments and a lower deposit requirement. The Shared Ownership scheme enables buyers to purchase a share of a property (between 25% and 75%) while paying rent on the remaining share. This option is ideal for those who cannot afford to buy a property outright.
- Equity Loan: Up to 20% government-backed loan, lower mortgage payments, and lower deposit requirement.
- Shared Ownership: Purchase a share of a property, pay rent on the remaining share, and ideal for those who cannot afford to buy outright.
