Help schemes for first-time buyers explained

As a first-time buyer, there are a number of government schemes designed to help you out.

1. Help to Buy: Shared ownership

Under this scheme you can choose to buy a share of between 25% and 75% of a property, either using your savings or a mortgage. The government then buys the remaining share of the home and you rent it from them at a discounted rate.

The idea is that you can buy the remaining share of your home off the government in the future when you can afford it.

As with most schemes, you have to be eligible. With shared ownership:

  • It’s only available in England.
  • Your household income must be less than £80,000 a year, or £90,000 in London. 
  • You can only use the scheme to buy a newly-built home or one being sold by a housing association.

Speak to an advisor

Locally-based Help to Buy agents can guide you through the options available in your area and explain if you are eligible . Find out more here.

2. Help to Buy: ISA

Homebuyers in a meeting

The Help to Buy: ISA is a savings account designed to help first-time buyers by boosting their savings by 25% when they are buying a home. That’s far more than you would earn in interest at any bank or building society, but there are limits to how much you can save and the bonus you can earn, including:

  • You have to save at least £1,600 into your Help to Buy: ISA before the 25% government bonus kicks in.
  • To get your account started, you can pay in up to £1,200 in the first month, but after that you can only save up to £200 a month.
  • The total amount you can pay into your Help to Buy: ISA is capped at £12,000, so the biggest bonus you can earn is £3,000. If you are buying your first home with a friend or a partner, however, you can both take out Help to Buy: ISAs, so together you can qualify for bonuses of up to £6,000.
  • The property you are buying must cost no more than £250,000, or £450,000 in London.

Bear in mind that you don’t actually get the bonus until you buy the property. The solicitor who is handling the purchase must apply for it and it is then added to the money you are spending on the property.

Find out if you are eligible for a Help to Buy: ISA here.

Check the fine print

Some of the Help to Buy schemes can be combined, but others can only be used alone. You can find detailed information on how all the Help to Buy schemes work here.

3. Help to Buy: Equity loan

With a Help to Buy: Equity Loan, the government lends you up to 20% of the cost of buying your first home, or 40% in London, so initially you only have to find 80% of the property’s value. 

Typically, you would still have to pay 5% of the property’s value as an upfront deposit and take a mortgage on the remaining 75%, with the government’s 20% stake helping reduce the initial deposit and your monthly mortgage payments.

You pay back the government loan over 25 years, but won’t be charged fees for five years. If you sell the home, the government gets 20% of the sale price.

More detail:

  • The home you are buying must be a new build costing less than £600,000, or £300,000 in Wales.
  • The scheme is only available in England, but the Scottish and Welsh governments run similar schemes too.

4. Help to Buy: Mortgage guarantee

Mortgage advisor with clients

The Help to Buy: Mortgage Guarantee scheme is a way of reducing the deposit that you need to pay upfront when buying your first home.

It works the same way as a normal repayment mortgage, but the government guarantees that it will pay back your mortgage company if you don’t repay the loan and the lender ends up out of pocket.

The aim is to encourage mortgage providers to lend more to borrowers, and it means that you could buy a home with a deposit as low as 5% of the purchase price.

However, this could mean that your monthly mortgage payments are high, so your lender will want to check that you can afford them.

More information:

  • Can only be used to buy a home up to a value of £600,000.
  • The mortgage you apply for must be less than 4.5 times your annual income.
  • The scheme is due to expire in December 2016, although this could be reviewed and extended.

5. Discounted sales

Discounted sales are locally-run schemes where some homes built by English councils and housing associations are sold at a 25% to 50% discount to help local people get on the property ladder.

The criteria for these discounted sale schemes are set locally, so they can vary, but you will typically have to prove that you live or work in the area.

Other common conditions include:

  • Your household income must be less than £60,000.
  • This can’t be combined with any other Help to Buy schemes, apart from the Help to Buy: ISA.
  • You must have a deposit and qualify to take out a mortgage on the property. 

It’s important to note that not every council and housing association offer discounted sales, so you’ll have to contact yours to find out more.

Look into local schemes too

We’ve covered the key national schemes here, but many local authorities operate their own schemes too, so it’s worth exploring what’s on offer in your area.

If you have special circumstances, for example you are disabled, a key worker like a nurse or teacher, or serving in the Armed Forces, then there may also be extra help on offer.

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