Confused about government home buying schemes? Here’s a quick guide…
The Government launched it’s long awaited First Homes scheme earlier this month (June 2021), and this joins a number of other schemes aspiring homeowners might look to for support. Knowing which does what however is not always obvious, so here’s our quick guide to the different schemes currently on offer.
- First Homes – A number of homes being built as part of new developments will be made available for sale with a genuine discount of 30%-50% off the open market value. You must be a first time buyer, the combined income of all buyers must not exceed £80,000 (£90,000 in London) and you must also have a ‘local connection’ to the area. The maximum purchase price after the discount has been applied has been set at £250,000 (£420,000 in London). This means that before the discount is applied the maximum property value would be £357k-£500k in most areas, or £600k-£840k in London. When you sell the property in the future, the discount stays with the property so the next owner can benefit.
- Help to Buy (Equity Loan) is a loan from the government that you put towards the cost of buying a newly built home. Help to Buy aims to help first-time buyers to get on the property ladder. If you’re eligible for an equity loan, you can borrow up to 20% (40% if you’re in London) of the market value of a new home. When you take out an equity loan, you only pay interest on the amount you borrowed, but if you want to pay off the equity loan in the future you’ll have to pay 20% of the property’s value at that time, so you could still end up paying back more than you borrowed.
- Shared Ownership gives first time buyers the option to buy a share of their home (between 10% and 75%) and pay rent on the remaining share. The government is making shared ownership more accessible by reducing the initial share you can buy in your new home from a quarter to 10% and allowing you to increase your share in 1% instalments. This means that you can increase your share of the property in manageable payments when you want, at a pace that is right for you
- Help to Build is designed to help self and custom home building become a realistic option to get onto the housing ladder through lower deposit mortgages. Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned, made to order home, or a new design from scratch. The scheme will provide an equity loan on the completed home, similar to the Help to Buy: Equity Loan scheme above.
- 95% Mortgages – The mortgage guarantee scheme allows first time buyers to purchase a home with only a 5% deposit. The scheme has helped to increase the supply of 5% deposit mortgages for credit-worthy borrowers by supporting lenders to offer these products through a government-backed guarantee. From the borrowers point of view this is just a regular mortgage, the government support is to the lender, to get the deals to market.
Where to start if you want to understand your options – Taking independent mortgage advice is a good starting point and we’d be happy to help you work out your buying power if you get in touch. You should also check your credit score using one of the free credit checking websites such as MSE Credit Club. Other than that, keep an eye out for local developments in your area as many of the schemes above are only available on newly built homes and all developments over a certain size must allocate a percentage of the units to affordable housing.
Our team of advisers are familiar with all types of affordable housing schemes so why not get in touch and see how we can help, or sign up to our monthly newsletter, to keep informed of developments.