Government Help to Buy a Home: Schemes & Guidance
Due to rising house prices and difficulties saving, many of us need help buying a home.
For years, the government has launched schemes to give hopeful homeowners a helping hand onto the property ladder.
But, what are these? How can they help? Time for a breakdown of the options available to you.
Here’s a closer look at government help to buy a home.
Why do we need government programmes for buying a house?
First things first, why are government home buying programmes a necessity?
- Rapidly increasing property prices have hit first-time buyers particularly hard
- Increasing difficulties saving for a deposit (e.g. sky high rent)
- A growing housing crisis has fuelled property price rises
- The increased use of credit history checking has made mortgages much more difficult to get
Now we know the background for why so many need help getting a house, let’s explore how we can combat the issues.
Government help to buy a house – where it applies
It’s important to be aware of where government assistance for buying a house is applicable.
Help for first-time buyers, or indeed any buyers, in England, differs from that found in Northern Ireland, Wales and Scotland.
So, some schemes mentioned in this guide may not necessarily be available in these parts of the UK. In some cases, they may be available – but contain different criteria relating to how they’re used and what they do.
The Help to Buy ISA
This is one of the most famous programmes for those who need help to buy a first home.
In short, the Help to Buy scheme boosts your savings by up to 25%, giving first-time buyers a helping hand onto the property ladder. It’s important to note this scheme closed in November 2019. If you have an ISA, you can continue saving in it until November 2029.
How it works
When planning to buy a house, a maximum of £200 per month needs to be saved in a specific ISA, which the government essentially ‘tops up’ by boosting your savings by 25%. So, for example, for every £200 you save, you get a government bonus of £50.
Of course, there are some rules in place. For example, you need to have saved a minimum of £1,600 to receive the minimum government payment of £400.
The maximum loan you can receive is £3,000! This does not need to be paid back.
Who is eligible?
Unsurprisingly, not everyone is eligible for this scheme.
To qualify for help to buy, you must be:
- A UK resident with a National Insurance number
- A first-time buyer
There are some rules in place for the properties that qualify also:
- It must be priced over £250,000 (£450,000 in London)
- It cannot be sub-let or be a secondary place of residence
- It must be bought with a mortgage
As a result, understanding how mortgages work is vital for those hoping to qualify for the scheme!
The Help to Buy Equity Loan
Those who need help getting a home also consider the new Help to Buy equity loan.
This shared equity mortgage one of the more popular house buying programmes among hopeful homeowners.
How it works
With equity loans, you do need to pay them back. But, you can borrow more – as the government will lend up to 20% of the purchase price. This rises to 40% in London.
You’ll also need a mortgage. In London, this is usually up to 75% of the money required to buy the property, or 55% in the rest of the UK.
A 5% deposit must be saved by the buyer.
Who is eligible?
You must meet the following criteria to be eligible for the equity loan:
- The property must be a new build
- The purchase price should be up to £600,000 in England, and you must prove you can’t afford this without help
- There are property price caps depending on where you live, e.g. £186,100 in the North East
- You must pay the loan back in full
The Right to Buy scheme
Another well-known home ownership programme for low-income families or first-time buyers is the Right to Buy scheme.
What does it do? Who can apply? Let’s take a closer look…
How it works
If you have been a social housing (council) tenant for more than 3 years, you may have the right to purchase your property at a discount of up to £112,800 (£84,600 outside London).
These years don’t have to run back to back!
But, the qualifying tenancy period may be reduced if your partner/spouse or parent was a previous tenant.
However, housing association tenants aren’t usually eligible.
Taking advantage of the RTB scheme
So, if the Right to Buy scheme sounds right for you, what does the process look like?
- First step: complete a formal application and send it to your landlord
- The landlord must say “no” or “yes” within 4 weeks (8 if they have been your landlord for less than 3 years)
- If they don’t agree to sell, they must provide you with a detailed explanation in writing
- If they agree to sell, they must make you an offer within 8 weeks for freehold property, or 12 in the case of leasehold
- The landlord’s offer must contain full details of their calculation of the property’s offer value and how they have worked out your discount. They must also declare any known problems with the property (e.g. subsidence)
- You have 12 weeks to consider and accept or refuse their offer. If you disagree with your landlord’s property valuation, you have a legal right to ask for an independent one
The Shared Ownership scheme
Another famous government buying scheme is Shared Ownership.
How it works
This scheme helps you buy a share of a home, allowing you to part rent and part buy.
In short: you own part of your home (25% to 75%) and pay rent on the rest.
Who is eligible?
This scheme isn’t solely for first-time buyers, as anyone earning under £80,000 (£90,000 in London) can apply.
But, it’s hugely popular with those who haven’t owned a home before, and can’t afford to alone.
The Rent to Buy scheme
The Rent to Buy scheme is an initiative designed to increase home ownership in the UK. The emphasis is on people who are unable to save any sort of deposit. Essentially, it aims to turn renters to owners.
How it works
Essentially, the scheme applies new accommodation provided at a rental cost significantly below average market prices.
A major component of this scheme involves renters having the opportunity to purchase the property, without a deposit, with a 10% contribution, which is provided by Rentplus.
Rentplus has says it has over £2bn to invest. This is hoped to have a positive impact on those looking to buy a new build.
The scheme is funded by pension funds or investors looking for ethical investments.
Schemes can get you onto the property ladder, but it also helps to be armed with all the necessary advice. From insurance rates to deposits, we have plenty of help for first-time buyers in one place. The more you know, the better!
First homes
Launched in June 2021, First Homes are a specific type of affordable housing:
- Must be discounted by a minimum of 30% against the market value
- First sale must be at a price no higher than £250,000 (or £420,000 in Greater London)
- Must be sold to those who meet the criteria
Who is eligible?
Those purchasing a ‘First Home’ must be:
- First-time buyers
- Should have a combined annual household income not exceeding £80,000 (or £90,000 in Greater London)
- Should have a mortgage or home purchase plan to fund a minimum of 50% of the discounted purchase price
Last Updated: November 1st, 2024
