Buying your first home should be exciting, yet the prospect of saving enough money for a deposit can often be daunting. To help fund a property purchase, the government have introduced several schemes to assist first time buyers.
Help to Buy ISA
The Help to Buy ISA (Individual Savings Account) will give a boost to those struggling to save a deposit. Under this scheme, you can put up to £200 into a designated account each month and the Government will then top this sum up by 25%. This means £50 for every £200 saved.
There is also the option of paying in an initial one-off lump sum of £1,000 to get the account started. If you manage to save £200 a month for five years – giving a total of £12,000 – you will get the maximum bonus from the Government of £3,000.
Help to Buy Equity Loan
The government launched the Help to Buy scheme to make it easier for people with small deposits to buy their first property and for existing homeowners to move to a new house. Help to buy equity loans are only available for new-build properties. If you can put down a deposit of at least 5%, the Government will lend you up to 20% of the rest of the value of the property, interest-free for five years. This means you can access more affordable 75% mortgages.
The loan is not repayable until you sell the property, and it is repayable at the same percentage of the sale price. For example, if the loan was 20% of the purchase price, 20% of the sale price would be due. After five years, you will be charged a fee of 1.75% of the loan’s value and this fee will then increase every year.
Stamp Duty Land Tax
As buying a home is expensive, the government have assisted first time buyers with a Stamp Duty Land Tax (SDLT) relief. First time buyers purchasing their first home for £300,000 or less will pay no SDLT. Where the purchase price is over £300,000 but does not exceed £500,000, they will pay 5% on the amount above £300,000.
Lifetime ISA
A lifetime ISA can be opened by anyone between 18 and 39. You can save up to £4,000 a year towards your first home and the government will add a cash bonus of up to £1,000 a year on top.
To get the bonus you will need to buy a property that is under £450,000 with a residential mortgage. You can also use the Lifetime ISA along with other Government Schemes such as Right to Buy, Shared Ownership, and Help to Buy loans. You will need to have had the Lifetime ISA open for at least 12 months before being about to use it towards your first home.
Forces Loans
The Forces Help to Buy Scheme has been extended until the end of 2022. If you are in the UK Armed Forces, this government scheme is an interest-free loan of up to 50% of your annual salary (up to 25,000) to help pay for a new build home.
You can use the Forces Help to Buy Loan alongside the standard Help to Buy and Share Ownership Schemes. If you and your partner are both in the Armed forces, you can each use a Forces Help to Buy loan to buy a property together.
Our specialist New Build property solicitors can advise you on which government schemes are applicable to your circumstances.
