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Help to buy – explained!

A helping hand up the property ladder for first time buyers.

It seems to be getting harder and harder these days for first time buyers to get on the property ladder. Rising house prices mean that as fast as people are saving up, deposits are increasing, making home ownership seem out of reach to many. With more people renting in the UK than ever before, it seems many have given up altogether on ever owning their own home, but don’t despair, help is now at hand, in the form of several Government ‘Help to Buy’ initiatives.

Help to buy ISA

With a help to buy ISA, your savings are boosted with a further 25% gift from the Government, up to a maximum Government contribution of £3,000. So for every £100 you put in, you will actually be saving £125.

If you are saving to buy with a partner or a friend, they may also be eligible to join, meaning you could receive as much as £6,000 towards your dream home.

To join the scheme, you need to open an ISA with up to a £1,200 lump sum, and contribute up to £200 a month. Click here to find a mortgage provider who participates in the scheme.

In order to qualify you need to be:

  • Aged 16 or over
  • A UK resident
  • A first time buyer
  • Not own any other property anywhere else (including abroad)
  • Not contributing to another ISA in the same tax year
  • Have a national insurance number

The home you are purchasing must:

  • Be in the UK
  • Cost no more than £250,000 outside of London (£450,000 within London)
  • Be the home you will live in
  • Be the only home you will own
  • Have a mortgage

Although you can’t use the money for the actual deposit, the money is designed to be used towards the cost of your house purchase, so ensure that once you are close to buying, you apply to access the funds via your Help to Buy ISA provider, as a condition of the scheme is that the funds are used as part of the house purchase transaction. Click here to find a provider who participates in the scheme.

Other Government backed schemes that can help you achieve your dream of home ownership include:

Shared Ownership

If you can’t afford to buy a house outright, you could consider the Shared Ownership scheme, which enables you to buy between 25% and 75% of your home, and pay rent on the remainder. To apply, you need to contact your local agent in the area in which you want to live. Click here to find one in your area.

Help to Buy Equity Loan

If you are planning to purchase a new build, the Help to Buy Equity Loan scheme could help you increase your funds by 20%, enabling you to stretch to a slightly more expensive property if you want to. The Government contributes up to 20% of the property price, meaning you only need a 5% deposit, plus a mortgage to cover 75% of the property value. There are no loan fees to pay on the Government’s 20% stake for the first 5 years.

Mortgage Guarantee Scheme

This is available to help purchase any UK property you plan to live in (not rent out) up to the value of £600,000, provided you don’t already own a home anywhere else (including abroad). If you want to take advantage of this scheme you will have to be quick though – it will only be available until December 31st 2016. There is no additional fee to pay to take out a Help to Buy mortgage, and you can borrow up to 4.5 times your annual household income.

It works in the same way as a regular repayment mortgage, (offset and guarantor mortgages are excluded) but gives lenders the option to buy a guarantee on the loan. This enables participating mortgage providers to offer higher loan-to-value mortgages of up to 95% of the property price, so you only need to pay a 5% deposit, and take out a guaranteed mortgage for the remaining value.

The Mortgage Guarantee Scheme can be used in conjunction with the Help to Buy ISA, but cannot be combined with Equity Loan, Right to Buy or Shared Ownership schemes.

So if you had given up all hope of ever owning a property, maybe one of these Help to Buy schemes will make you change your mind!

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