Why the Help to Buy scheme is a great way to get on the property ladder

With demand for housing having risen significantly over the last few years, it has become more important than ever for people to get their first foot on the property ladder. The added security of being settled in a property (as opposed to renting) is greatly desired by many people – and this, often combined with a lack of viable houses for sale, has meant that the average deposit first-time homebuyers are required to pay has risen twofold since 2007.

Fortunately, there is help and support out there for those seeking to take their first steps onto the property ladder in the UK. The UK government Help to Buy scheme was set up with the aim of helping more people to be able to partake in home ownership. It does this by introducing a range of finance options – such as shared ownership, equity loans, ISAs and mortgage guarantees.

In this blog post we’ll be taking a closer look at each of these options, and explaining how they can be of help to those looking to buy a new property – and in particular, to those who are first-time buyers.

Help to Buy ISAs

The Help to Buy ISA scheme has been created to help those who are currently in the process of saving for their first home. Saving for a mortgage deposit can seem a gargantuan, mammoth task for those who work hard but are on a limited income. The Help to Buy ISA assists those who are saving by boosting the amount by a further 25%. So for every £200 a person saves towards their new home, a £50 government bonus is awarded. Crucially, this ISA is available to each individual buyer and not each household in total – and this means that the government bonus you could receive is anything up to a total of £6000 (with the maximum for each individual being £3000).

To apply for this kind of ISA you’ll need to speak to your local bank, building society or credit union and open an account with a deposit of £1200 (or less). You will then be able to save up to £200 a month towards the cost of your new home – to which the government will add its 25% bonus payment.

The Help to Buy Equity Loan

The Help to Buy ISA is not the only assistance on offer for prospective homebuyers. The Equity Loan is there for people who may wish to borrow up to 20% of the total cost of a newly built property – with the rest being made up of a 5% cash deposit and a mortgage for the remaining 75%. The government does not charge loan fees during the first five years of the Equity Loan being outstanding – so this option is useful for those wanting some extra financial flexibility in the first few years of owning their own home. And if you live in Greater London, the government will allow you to borrow up to 40% of the total cost of your new home (which is a reflection of London property prices).

Shared Ownership

Finally, for those first-time buyers who may not be able to afford a full 100% mortgage, there is the Shared Ownership scheme, in which there is the option to purchase anywhere between 25% to 75% of the property’s full value – with rent being paid on the remaining percentage of the property. This scheme is particularly suited to those who require added flexibility during the early stages of owning a property – perhaps with the view towards an increase in income several years down the line – as the option is always preserved for you to purchase the remaining percentage later on.