If you are not able to afford the purchase price of a home even with a mortgage or your own savings, there are government schemes that can help you buy a new home. The type of support available depends on where you live. You could be eligible for financial help in the form of a loan or mortgage guarantee, which will help you jump onto the property ladder.
Loans
In England, Help to Buy equity loans are available to first-time buyers as well as people who are moving. To be eligible, you must be moving into a new build home with a purchase price of £600,000 or less. Under the scheme you are not allowed to sub-let the property and it must be your only property. The loan allows you to contribute at least five per cent of the purchase price as a cash deposit. The government provides a loan for up to 20 per cent of the price and the remaining cost is covered by a mortgage. Loan fees are waived for the first five years and in the sixth year you are charged a 1.75 per cent fee on the loan’s value. The fee increases in subsequent years based on the Retail Prices Index (the rate of increase in prices for goods and services calculated by the Office for National Statistics) plus one per cent. The loan must be paid within 25 years or when you sell the property, whatever comes first.
The Help to Buy Shared Equity Loan in Wales is funded by the Welsh Government and is open to buyers in Wales. The scheme helps first time buyers and current homeowners when purchasing a new build property. The home can have a purchase price of up to £500,000. The minimum deposit when buying the property is five per cent. The Welsh Government also offers the Homebuy scheme through local authorities. It provides support through an equity loan. Designed for people who would need social assistance without help, the loan is generally 30 per cent of the purchase price, but can increase to up to 50 per cent. Loans can be paid back at any time, but they need to be repaid once the home is sold.
In Scotland, Help to Buy is available when buying a new home with a value of up to £230,000 when purchasing by 31 March 2017. Purchases between 1 April 2017 and 31 March 2018 can be up to £200,000, while purchases on or before 21 March 2019 must be £175,000 or less. Under the scheme, the Scottish Government helps buyers by taking an equity stake of up to 15 per cent of the purchase price. A mortgage is needed for the remaining value, although most lenders require a deposit of about five per cent. No annual interest is charged on your equity stake and the government’s stake can be repaid at any time.
Shared Ownership Schemes
Shared ownership schemes are also available through housing associations in England. If you are a first time buyer or you used to own but are not able to afford a home, applications are made through Help to Buy. You can buy a share of between 25 and 75 per cent of the property’s value, and you pay rent on the remaining share. A mortgage is needed to pay the remaining share of the home’s purchase. To be eligible, your annual household income must be £71,000 or less if you live in London and you are buying a one or two bedroom property or £85,000 or less if you are buying a home with three or more bedrooms. Outside of London, your annual household income must be £60,000 or less. You also need to be renting a council or housing association property.
Similar shared ownership schemes are available for homeowners that are older and have disabilities. The Older People’s Shared Ownership scheme is available to anyone aged 55 or older. It works in the same way as the general scheme. The main difference is that once you pay 75 per cent of the purchase price, you do not need to keep paying rent on the rest. The Home Ownership for People with Long-Term Disabilities (HOLD) scheme is available for people with long-term disabilities who need a ground floor property or another home that meets their needs that is not be available through Help to Buy. These schemes and the general shared ownership scheme allow you to buy additional shares in your home at any time. The cost will depend on the value of the property at the time when you buy more shares. You can sell the property once you own 100 per cent, but the housing association has the right to buy it first up until 21 years after you fully own the home. If you still own a share of the home, your housing association has the right to find a buyer.
In Scotland, the Open Market Shared Equity (OMSE) scheme helps low to moderate income earners to buy homes. To be eligible you must be a first time buyer. Priority is given to people renting from a local authority or housing association, disabled people, widows, armed forces members and veterans, and other priority groups. Under the scheme, you must be able to pay at least 60 per cent of the purchase price. Applications are made with local authorities or housing associations and decisions are made based on individual circumstances. The New Supply Shared Equity (NSSE) scheme provides grants to local authorities and housing associations and cooperatives to help them buy or build new homes. These homes are then available at a lower cost to first time buyers who would otherwise depend on social housing. The Northern Ireland Co-Ownership Housing Association also allows you to buy part of a home while paying rent to back for the rest. The initiative is similar to other shared ownership schemes in other parts of the UK.
Mortgage Guarantees
Mortgage guarantees under the Help to Buy scheme helps you buy a home with a cash deposit of five per cent of the purchase price. A government-backed guarantee is provided to the mortgage lender and you can apply directly from the lender. Participating lenders include some of the UK’s largest banks and financial institutions, including Bank of Scotland, Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Post Office, RBS, Ulster Bank and Virgin Money. Like equity loans, you can be a first time buyer or mover to be eligible and the property must be your only home. The property can be a new build or an older home, as long as the purchase price is £600,000 or less. The scheme is available across the United Kingdom.
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