How Does Help To Buy Work

Exploring How Help to Buy Works

Many people in London dream of owning their own homes but are often held back by financial constraints. Fortunately, the Help to Buy scheme was introduced by the UK government to help first-time buyers overcome this hurdle. In this post, we will explore how the Help to Buy scheme works, its benefits, and the different options available.

What Exactly is Help to Buy?

Help to Buy is a government scheme aimed at helping first-time buyers purchase a new build property or an existing property. It was first introduced in 2013 and has since helped thousands of prospective homeowners to secure their dream homes. The Help to Buy scheme offers an equity loan, where the government lends up to 20% of the purchase price of a new build property, thereby reducing the amount of deposit required by the buyer. The buyer must contribute a minimum of 5% deposit, and the remaining balance can be financed through a mortgage from a lender.

How Does Help to Buy Work?

Help to Buy offers a range of options to help first-time buyers afford their dream home. These include:

Equity Loan
The equity loan is the most popular option for many first-time buyers. Under this scheme, the government lends up to 20% of the property value in Greater London, and the buyer contributes a minimum deposit of 5%. This means that the buyer will need a mortgage for the remaining 75% of the purchase price. The equity loan is interest-free for the first five years.

Shared Ownership
Shared Ownership is a scheme designed to help people who cannot afford to buy a home outright. Under this scheme, a buyer can purchase a share of a property, typically between 25% and 75%, and pay rent on the remaining share. Over time, the buyer can increase their share of the property through a process known as ‘staircasing’.

London Help to Buy
The London Help to Buy scheme provides an equity loan of up to 40% of the purchase price for new build homes in Greater London. The buyer only needs to put down a minimum deposit of 5% and obtain a mortgage for the remaining amount. The equity loan is interest-free for the first five years.

Who is Eligible for Help to Buy?

To be eligible for the Help to Buy scheme, you must:

– Be a first-time buyer or someone who has previously owned a home but cannot afford one at present
– Be purchasing a property in the UK
– Have a 5% deposit of the property value
– Intend to live in the property

It is important to note that the Help to Buy scheme is not available to those purchasing a second home or buy-to-let properties.

Benefits of Help to Buy

The Help to Buy scheme provides several benefits to first-time buyers, including:

– Reducing the deposit requirement, making it easier to get onto the property ladder
– Providing interest-free loans for up to five years, thereby reducing the overall cost of borrowing
– Offering a range of options to suit individual needs and circumstances

Conclusion

Buying a home can be a daunting process, especially for first-time buyers. Fortunately, the Help to Buy scheme is here to help, providing loans, shared ownership, and other options to suit the needs of all. So, if you are planning to purchase your first home in Greater London, consider exploring the Help to Buy scheme to make your dream a reality.