Government Schemes That Can Help You Buy Your First Home

We all know buying a house is not as simple as it used to be. We also all know that renting vs buying your first home is a tricky and circumstantial debate. Renting is technically throwing away a lot of money that could be saved to purchase a home instead moving conveyancing solicitors.

There will be a great opportunity for homeowners to sell their properties once the national coronavirus lockdown has been lifted. Once you have sorted your conveyancing and you are buying a home why not get a Surveying quote for your Home survey. The usually high house prices of London will plateau and ripple through the rest of the UK property market. So, whilst the economy regains momentum, first-time home buyers in the market will want to strike as soon as possible to secure a good deal.

I’m sure you’ve heard about the various schemes the government has in place to help you get your foot on the property ladder. But, if you’re anything like me, you probably felt a little overwhelmed with the abundance of information and requirements. The Help to Buy scheme that assisted many first-time buyers is to be extended from 2021–2023. But, this guide will be focusing on the schemes available to you in 2020 due to the effect COVID-19 will have on the property market after the lockdown.

So, here are the three government schemes (explained and summarised), to help you buy your first home in 2020:

• Help to buy equity loan.

The help to buy equity loan is a low-interest loan to be put towards the deposit on your first house. The requirements are as follows:

• The home must be a new build
• The purchase price must be £600,000 or under.
• It must be the only home you own.
• You can not sub-let or rent the house out after purchase.
• The home must be bought from a registered Help to Buy builder

To receive the equity loan, you must have a 5% deposit and the government will lend you up to 20% of the home’s purchase price. You will then need a mortgage of up to 75% to pay the rest of the price. Here is an example from https://www.gov.uk/:

For the first 5 years of owning your first home, you will not have to worry about paying any fees. However, from the sixth year onwards, you will have to pay 1.75% of the loan’s value. This fee increases every year plus 1%. You can set up these as monthly fee payments with your Help to Buy agent. These fees do not count towards paying back the loan (which must be paid back after 25 years of the purchase).

So, although this scheme will help you buy your first home quickly, you will have debts to pay in the future. However, you can pay back parts of, or even all of the loan, at any time you want.

The application process can be found here.

• Shared ownership.

This scheme is, in its essence, buying a share on your first home. Through a housing association, you can have a shared ownership on a house. You can have a share of between 25–75% and pay rent on the rest. There are the requirements, according to the gov.uk website:

• Your household income must be less than £80,000 a year (£90,000 in London).

Combined with any of the following:

• You must be a first-time buyer
• You have previously owned a home but cannot afford one now
• You are an existing shared owner

A shared ownership on a house will always be a leasehold property. This means that you can only own it for a fixed period of time. The ‘lease’ is a legal agreement with your landlord or freeholder which tells you how many years you can own the property.

However, ‘staircasing’ is an option after you become the owner of your first home. This term means you can buy more shares after your initial purchase. Depending on property prices in your area, the cost of your new shares can fluctuate.

To apply, you can contact the Help to Buy agent in the area you want to buy your first home here.

• Lifetime ISA.

This is the next best scheme after the Help to Buy ISA ceased in 2019. The Lifetime ISA is an individual savings account that you can set up to help buy your first home or for any other personal reasons.

A maximum of £4,000 can be put into the account each year until you reach 50. The government adds 25% on top of your savings (a maximum of £1,00 per year).

To withdraw the money from your Lifetime ISA, you must be:

• Buying your first home
• Be aged 60+
• Have a terminal illness with less than 12 months to live

For any other reason to withdraw funds from the account, you will have to pay a 25% fee. So this account is beneficial for saving in the long run.

There are requirements for using the funds to buy your first home too:

• The home must cost £450,000 or less.
• You have to buy the home at least 12 months after opening the Lifetime ISA.
• The funds will be paid directly to a licensed conveyancer or solicitor that you must hire to facilitate the purchase.
• You must be buying with a mortgage.

There is nothing stopping you from buying with another individual who has a Lifetime ISA too.

When you decide on which option to go for you will need a Conveyancer to manage your property transaction. The Homebuyer Conveyancing website provides a price comparison service on the legal fees and disbursements involved. It’s easy to instruct 24/7