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How does Help to Buy work?


Looking to purchase your first home?


"If you’re looking to purchase your first home or you’re interested in moving to a new home, Help to Buy could be an option for you. It’s likely you’ve heard of this term before - but you might be wondering what it means and how it works."

To find out more about Help to Buy and how you could benefit from it, keep reading.

What does Help to Buy mean?


In short, Help to Buy refers to a range of schemes that have been introduced by the government to make purchasing a home that little bit easier. Primarily aimed at first-time buyers, these schemes offer financial assistance and could be just what you need to get onto the property ladder, putting you one step closer to owning the home you’ve always dreamed of.

The three main Help to Buy schemes are:

Buying Through Shared Ownership


Shared Ownership provides you with the chance to buy a share of the home you’re moving into. The share you purchase must be between 25 and 75 percent of the property’s value. You would then need to pay rent on the remaining portion, with the opportunity to buy a bigger share later on. The Shared Ownership scheme is ideal if you can’t quite afford the mortgage on 100 percent of a home

Help to Buy Equity Loan
With the Equity Loan scheme, the government lends you up to 20 percent of the cost of a newly built property. To cover the remaining 80 percent, you’ll need to have a five percent cash deposit and take out a 75 percent mortgage. For the first five years of owning your home, you won’t be charged any fees on the 20 percent loan.

Help to Buy ISA


Opening a Help to Buy ISA might be the ideal choice for you if you’re saving to buy your first home. Under this scheme, you can deposit a lump sum of up to £1,200 upon opening the account, and after this, you are allowed to transfer up to £200 per month. The government will then add 25 percent to your savings up to a maximum contribution of £3,000. To receive this amount, you will need to save £12,000.

Who is eligible for Help to Buy?
So that you can take advantage of the schemes offered under Help to Buy, you will need to meet certain eligibility criteria. It’s important to note that these criteria can vary between each scheme, so it helps to understand the differences.

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To qualify for the Shared Ownership scheme


For instance, to qualify for the Shared Ownership scheme, you must be at least 18 years old and have an annual household income of less than £80,000, or less than £90,000 if you live in London. You can buy your home through this scheme if you’re a first-time buyer or if you previously owned a property but you cannot afford to buy a new one. If you are an existing shared owner wanting to move, you will also qualify for the Shared Ownership scheme.

If you’re interested in the Help to Buy Equity Loan, you must be a first-time buyer or a homeowner who wishes to move. To use this scheme, you must also make sure that the property you want to buy is newly built and costs no more than £600,000. You must not own any other property at the same time as buying your new home, and it’s important to note that you cannot enter a part-exchange in regards to your old home or sublet your new home.

Help to Buy ISA criteria


To open a Help to Buy ISA, you will need to meet a specific set of criteria. For example, you must:

● be aged 16 and over, and be a resident of the UK
● have a valid National Insurance number
● be a first-time buyer
● not have another cash ISA which is active in the same tax year. (If you do, you may have to take extra steps to transfer up to £1,200 of your savings into a Help to Buy ISA.)

You must also make sure that the property you’re buying:

● has a price tag of less than £250,000, or £450,000 if you’re buying in London
● is the only property you own and it is where you intend to live
● is purchased with a mortgage

Becoming familiar with the eligibility requirements for the different Help to Buy schemes is crucial if you’re interested in using one of them to purchase a property. You will be able to find out more about the criteria for each of the schemes online.

(The Help to Buy Scheme ends on the 15th of December 2020. Correct at the time of publishing)

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