Many young homeseekers dismiss buying a property believing they cannot afford it. But, several 'affordable home ownership schemes' can help first-time buyers buy a property.
HELP TO BUY SCHEMES: You could get started on the property ladder by taking advantage of an affordable home scheme.
Providing you qualify for financial help from the UK government to buy a home, you could get:
Note: The Help to Buy mortgage guarantee scheme is no longer available. It closed at the end of 2016.
There are opportunities available for buying your own council home or housing association property. Most council tenants will have the 'Right to Buy' their council home. Likewise, tenants also have 'Right to Acquire' buying their housing association home.
A 'Help to Buy' equity loan is a special type of low-interest loan used towards a deposit when buying a property.
To qualify for this type of equity loan the home you are buying must be a new build, the only one you own, and:
You are going to need a 5% deposit before you can get the equity loan. Once you have secured the deposit:
Note: You can only buy a home from a registered Help to Buy builder listed with one of the local agents. Some Help to Buy equity loan rules differ in Wales.
Equity loan fees need repaying but not during the first five (5) years. You would get charged a 1.75% fee of the loan value in the sixth year. The fee then increases each year afterward according to the Retail Prices Index plus 1% (one percent).
The monthly fee arrangements will be set up by the Help to Buy agent. They also send an annual statement about the loan and the repayments.
Note: The fees do not count as part of paying back the equity loan.
You would need to pay back the loan if you sell your home or after 25 years (whichever happens first). The total amount you pay varies according to the market value of the property.
You can also choose to pay back the loan early - either in part or in full. But, the smallest repayment allowed is 10% of the market value of the home.
Some homeowners may be struggling to pay interest fees on their equity loan because of the coronavirus outbreak. The UK Government announced payment holidays on Help to Buy equity loans taken out before the 31st of March 2015.
Help to Buy Equity Loan Administrator
Telephone: 0345 848 0236
The government can help those who are saving to buy a first home. The Help to Buy ISA scheme can top up your savings by 25% (to a maximum of £3,000). If you are buying a home with another person they may also qualify for a Help to Buy ISA.
Note: This type of affordable home ownership scheme is not a loan. Thus, you do not need to pay it back to the government.
To qualify for the Help to Buy ISA the property that you buy must:
Note: The rules allow you to use the Help to Buy ISA scheme in conjunction with a Help to Buy equity loan.
The first payment to the ISA can be no more than £1,200. You can then pay up to £200 per month afterward. The conveyancer or solicitor would apply for the extra 25% when you buy the property.
You can apply from any one of the following in this list of Help to Buy Individual Savings Account providers:
Your local housing association may offer a shared ownership scheme. If so, you would buy a share of your home (from 25% to 75%) and then you pay rent on the rest.
You can only buy a home through shared ownership if your household earnings are no more than £80,000 a year.
The upper threshold rises to £90,000 a year for a property in London. Besides the earnings criteria, any of these must also apply:
Note: Different rules on buying through shared ownership apply in Northern Ireland and Scotland. Your local authority can give further advice on buying a shared ownership home in Wales.
All shared ownership properties are leasehold. That means you would only own a leasehold property for a fixed period of time.
You can buy up to 75% of your home once you get to the age of 55. It takes place through the Older People's Shared Ownership (OPSO) scheme. In this case, owning 75% means you would not pay rent on the rest.
You can apply for a scheme called 'HOLD' or home ownership for people with a long-term disability. You qualify if other Help to Buy scheme properties fail to meet your needs (e.g. needing a ground-floor property). You can buy up to 25% of your home with this particular scheme.
Note: Being disabled means you can also apply for the general shared ownership scheme. You could own up to 75% of your home with this scheme.
If you become the owner you can then buy more of the home - called 'staircasing'. The cost of the new share varies. It would depend on the value of the home at the time you want to buy the share. As a rule, it costs:
The housing association would get the property valued. Following that, they would inform you of the cost of a new share. But, you would be responsible for paying the valuation fee.
The housing association has the first right to buy it if you own a share of your home. This is also called the 'first refusal'. In fact, the housing association would also have the right to find a buyer for the home.
Note: Owning the full 100% of your home means you can sell it yourself.
You should contact a Help to Buy agent in your local area if you want to buy a home through a shared ownership scheme.
Affordable Home Ownership Schemes in the United Kingdom