By Frances Traynor
24th April 2018
What is Help to Buy?
Help to Buy is a Government-backed scheme to allow first-time buyers and low earners to purchase a home. Introduced in April 2013, so far it has helped around 300,000 people to get on the property ladder. Currently it has funding of £10 billion that will allow it to run until at least 2021.
What are the different options?
There are three Help to Buy options: equity loan, Help to Buy ISA and shared ownership.
The equity loan is a loan of up to 20 percent of the purchase price of a property (40 percent in London), which is interest-free for the first five years. After that, you pay interest on the loan of 1.75 percent annually, rising by 1 percent above the rate of inflation every year after that. The interest payments do not reduce the loan amount. Instead the loan is repaid when the house is sold or the mortgage is repaid, whichever comes first.
A Help to Buy ISA lets you save money tax free for a deposit and the Government will boost your savings by 25 percent. For example, for every £200 you save, you get a bonus of £50. The maximum bonus you can receive is £3,000.
Shared ownership allows you to buy up to 75 percent of a newbuild or second-hand property and pay rent on the remaining share. When you can afford it, you can buy further shares in your home, a process known as staircasing. Your household must earn no more than £80,000 a year or £90,000 a year in London.
I want to buy in London, what scheme can I use?
Shared ownership is available across all of England, including London boroughs. Your household must earn less than £90,000 a year.
Am I eligible for a Help to Buy shared ownership?
To be eligible for shared ownership, you cannot already own a home and your household must earn less than £80,000 a year. There are specific schemes for those with disabilities – Home Ownership for People with Long-Term Disabilities (HOLD) – and for older people – Older People’s Shared Ownership (OPSO).
This scheme is only available in England. Both Scotland and Wales have their own separate Help to Buy projects.
What sort of property can I buy and is there a price limit?
You can buy a newbuild home or an existing property from housing associations. All shared ownership properties are sold as leasehold. There is no price limit, but most will fall into the affordable category.
How much can I own of my home?
You can buy from 25 to 75 percent of a shared ownership property initially. You will pay rent on the remaining percentage that will continue to be owned by the housing association. You will need a minimum 10 percent deposit for the share you are purchasing and a mortgage, if required, for the rest.
When you can afford to do so, you can buy further shares in your home until you eventually own it outright. This is a process known as staircasing.
Older people who use OPSO for shared ownership can only own a maximum of 75 percent of their property.
What happens when I decide to sell?
Unless you own the property outright, you will have to go through the housing association that owns the remaining share to sell, at least initially. You will have the property independently valued and its selling price will be the market value at that time. Where the housing association does not have a buyer for your property, you can sell it on the open market.
How do I apply?
There are Help to Buy agents in each region of England who will assess your eligibility and help you apply for an equity loan. You can find the one for your region on the Help to Buy website.
When do I need a conveyancing solicitor?
Once you have been accepted on the Help to Buy scheme and have found the property you want to buy, you need to instruct a solicitor to act on your behalf for the purchase. Homeward Legal works with solicitors across England who are expert in dealing with Help to Buy purchases and can give you the precise advice and service needed.
Our panel of solicitors also includes experts in dealing with staircasing when you decide to purchase a bigger share of your home.
Call us on 0800 038 6699 now to find out what we can do for Help to Buy customers.
Frances Traynor Conveyancing Expert
Homeward Legal has put together some handy guides to help you with your first property purchase. Let us know if there is anything we've missed, and as ever, feel free to call 0800 038 6699