Buying a home? Government schemes can help

Buying a home in the UK is harder than ever. House prices have risen dramatically while salaries have remained pretty stagnant – and the cost of living means that saving for a hefty deposit is a real struggle for many.

It all sounds pretty grim, but there is help out there. The UK government has introduced various schemes for buying a home to help people get on the property ladder.

Read on to find out more about them.

Help to Buy: Mortgage Guarantee Scheme

This scheme offers home buyers the chance to secure a 95% mortgage with just a 5% deposit. The government assumes liability for 15% of the mortgage, which offers lenders the assurance they need.

Advantages: 

• Only 5% of the property’s value is needed upfront
• Available on new-build and older properties
• You don’t need to be a first-time buyer

Things to consider: 

• Not available on houses over £600,000
• The scheme is ending at the end of 2022
• Not available to those without good credit/regular income

Help to Buy: Equity Loan

This ongoing scheme has been updated for the 2021-23 period. Currently, the government is offering a loan of 20% of the value of a new-build property (40% in London) to enable first-time buyers to get on the property ladder.

Advantages: 

• Loan of up to 20% of the value of a property (40% in London)
• Loans are interest-free for the first five years

Things to consider: 

• Only available for first-time buyers
• Only applicable to new build homes
• You or anyone you’re buying with (such as your partner) can’t have ever owned a property before (including overseas)
• There are regional price caps on homes

Help to Buy: Shared ownership

This scheme offers loans to buy part of a home from a developer or housing association while paying the rent on the remaining share of the property. You can gradually increase your property ownership until you own 100% of it (known as ‘staircasing’).

Advantages:

• Loans cover a mortgage for 25% - 75% of a property’s total value, and you pay rent (at a discount) on the remaining share.
• Lower deposit – could be as little as 5% of 25% of the property value, so for a £150,000 home, the deposit could be as low as £1,875.
• Stamp duty is deferred until you own 80% of the property.

Things to consider:

• Most properties are leasehold, meaning maintenance fees and service charges will apply. 
• It could make moving more complicated – the housing association/ local authority gets ‘first refusal.’
• Your whole property could get repossessed if you don’t keep up with the rent on the share still owned by the housing association/ developer.

First Homes Scheme

This scheme offers first-time buyers a 30% discount on a new-build property compared to market value. It’s designed to help people afford home ownership in the area where they work.

Advantages:

• 30% discount on a brand-new home
• If you already live in the area or are a key worker, you’ll get priority in the scheme

Things to consider:

• The buyer’s combined household income must not exceed £80,000 (or £90,000 in London)
• If you sell up, you’ll have to offer it to First Home scheme buyers first with the same discount
• Available to first-time buyers only and must be all buyers’ first and only home 
• New builds come with a premium, which may offset some of the initial discount

Right to Buy

This long-running scheme offers up to 70% discount on purchasing the council property you’re currently renting, compared to market value. The discount offered depends on how long you’ve lived there.

Advantages:

• If you’ve been renting a place for between 3 – 6 years, you may qualify for a 35% discount for a house and a 50% discount for a flat
• For every year you’ve lived there after that, a further 1% discount applies up to a maximum discount of 70% of market value.

Things to consider:

• There are caps and restrictions – for example, the total discount can’t exceed £84,000 (£112,000 in London).
• You still have to qualify for a mortgage to cover the remaining cost of the property and save a deposit
• If the property is leasehold, you’ll also need to pay service charges and maintenance fees

Rent to Buy

This scheme gives people the opportunity to rent a home at a discounted rate, assuming they will later buy the home (or a share of it). The period of renting at a reduced rate is for the purpose of allowing the renter to save for a deposit – although this isn’t an obligation.

Advantages:

• The opportunity to rent a new-build property at a 20% discount of market rent rates
• After renting for up to five years, you can buy the property (or part of it under a shared ownership scheme) using the money saved via the reduced rent

Things to consider:

• Limited availability due to high demand 
• You don’t have to wait five years to make an offer to buy, you can do it sooner
• Your household must earn £60,000 or less combined
• It’s up to you to save money saved on rent towards a deposit and not spend your saving elsewhere.