Coming off the back of the credit crunch that occurred back in 2007/2008, the government opted to present the country with a financial support system, in a bid to try and provide a much needed boost to the property market, hopefully bringing it back to glory.
In order to see this vision achieved, they sought to introduce new ways of assisting first time buyers to find their place on the UK property ladder. These were named the Help to Buy Mortgage Schemes.
Though some have since expired, there is still a wide range of different Help to Buy Schemes available to home buyers these days. Not all of these will be applicable to you, but you may match up with one that is perfect for helping you on your journey.
In this article, we have put together a detailed list of the Help to Buy Schemes available, with a selection of individual government schemes that you might find useful on your path to mortgage success.
The Help to Buy Equity Loan is the one you may have heard of the most, and is the most popular of the different schemes available. If you happen to be a first time buyer in need of a financial boost to put you in a better place for purchasing a new build property, this might be the perfect mortgage option for you to take.
In order for a customer to utilise this scheme, you will of course need to be a first time buyer, as well as purchasing a new build property. A new build property is brand new and is not from past periods. You will also need to make sure that you have a minimum of a 5% deposit.
The way this scheme works is that you save up a 5% deposit, ready to use for a purchase. From there, the government will loan you an additional 20% to add onto that, giving you a much larger 25% deposit to put down.
This isn’t just 20% for any amount mind, so if you put down 10% deposit, you wouldn’t get 30% overall. It all works within the amount of 25. So a 5% deposit would give you access to a loan of 20% from the government, 10% would give you access to 15% extra, and so on.
Once you have put down the 25% deposit for the property, you will be taking out a 75% loan-to-value mortgage. On top of this, you will also have the equity loan to pay back to the government.
You are limited to a maximum of 5 years interest-free on the government loan. After this period, interest will be incurred. It’s also important to remember that the 20% is a stake in your property, so should the value go up, so too will the amount you need to repay.
Click to read more about the Help to Buy Equity Loan Scheme.
The Help to Buy Shared Ownership Scheme was brought into the world as a method of allowing applicants to take out a mortgage on a percentage of a property they’ve been looking to buy, then paying back the remaining percentage as monthly rent payments.
Generally speaking we find that the percentage of the property that goes in your name as a homeowner will be between 25-75%, though depending on the property you’re purchasing, this can possibly be 10%.
The remaining percentage will most likely be owned by either your local housing association or council, though there are other organisations who can be involved.
Shared ownership works in a way that means you’ll be paying a monthly rent to your provider (landlord), as well as monthly mortgage repayments on the percentage that you purchased.
With this government scheme, your property will be leasehold. Leasehold properties usually have ground rent and service charges that will be billed monthly. Irrespective of the percentage of the property that you own, you will be liable for 100% of these monthly charges.
Further down the line, you may have the option to buy more shares, reducing how much you pay in rent. This is called “staircasing”.
You will be able to purchase either a new build home, a shared ownership resale home, or a home for specific needs, say if you have a long-term disability.
Click to read more about the Help to Buy Shared Ownership Scheme.
The government introduced the Armed Forces Help to Buy Scheme way back in 2014, coming off the back of the success of the Help to Buy Equity Loan Scheme.
This scheme was reminiscent in concept, though had a stronger focus on helping out members of the United Kingdom armed forces in their bid to find their footing on the property ladder.
If you fall into the specific criteria for this scheme, you have a fantastic tool at your disposal ahead of your mortgage.
In big news too, the government chose to extend the deadline date of the Armed Forces Help to Buy Scheme, meaning it gets to stick around now until December 2022!
We personally would love for this to stay around as long as possible, as the scheme is an incredibly helpful method for existing armed forces members to receive a much needed financial boost that will see them onto the property ladder.
Click here to read more about the Armed Forces Help to Buy Scheme.
The Lifetime ISA tends to be a scheme that gets left out of the conversation when it comes to helpful ways to get onto the property ladder.
Whilst it may not be the most suitable scheme for everyone to use, it’s still quite handy to make sure that you have some initial knowledge on it.
This is because if you’re a first time buyer, it could end up being a very useful financial option for saving towards the costs of home buying.
A Lifetime ISA, if we boil it down to basics, is a savings account in which you can deposit funds to sit and grow, free from tax.
The government will also give a boost to your savings by an further 25%. This means that if you are able to meet £4,000 maximum yearly amount, you could be left with quite a handy little £1,000 bonus.
There is specific criteria that you will have to meet in order for you to make use of the Lifetime ISA Scheme.
Click to read more about a Lifetime ISA.