14 December 2021
Buying your first home?
The process of purchasing your first home can be quite daunting, which is why it’s important to know about several first-time buyer schemes which are currently on offer. They could provide the support and help you need to make purchasing your first home possible.
Over the years, the government has introduced several schemes to help first time buyers. Each scheme has its own criteria in which a first-time buyer must meet to be eligible.
B P Collins would be pleased to assist you with the purchase of your first home and guide you through the process, whether you’re seeking the assistance of one of the following schemes or not.
The first of this two-part series will explore the Help to Buy: Equity Loan, the Lifetime ISA, and the Help to Buy ISA. The second part will delve into the Shared Ownership Scheme and the First Home Scheme.
Help to Buy: Equity Loan
In 2021, the Government reviewed the Help to Buy equity loan, which has been in circulation since April 2013 labelling it the ‘Help to Buy: Equity Loan (2021-2023)’. The scheme previously allowed both first-time buyers and home movers to purchase a new-build property with a 5% deposit. The 2021-2023 scheme is now limited to first-time buyers only.
The loan is provided by the Government, which you put towards the cost of buying a new-build property. If you are eligible, you can borrow between 5% and 20% of the market value of the new build if the property is situated outside London or between 5% and 40% if the property is situated within London. During the term of the loan, you only pay interest on the amount you borrowed. Once you sell your home, you will need to pay off the entire loan.
The Government has also introduced regional price caps, which means that properties eligible for the scheme have to be below the maximum price cap set by the Government.
The Lifetime ISA (‘LISA’) is an Individual Savings Account, of which the funds can be used for purchasing your first home or save it for later in life. You must be over 18 but under 40 to open a LISA.
The LISA allows you to pay in up to £4,000 each year until you are 50 but you must make your first payment before you are 40. The Government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
You can use your savings to help you buy your first home if all of the following criteria apply:
- the property costs £450,000 or less
- you buy the property at least 12 months after you make your first payment into the Lifetime ISA
- you use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
- you’re buying with a mortgage
Your solicitor or conveyancer will apply for the bonus on your behalf.
Help to Buy ISA
The Help to Buy ISA operates in a similar way to the Lifetime ISA, but new ISAs cannot now be opened as the cut off for opening new accounts was 30 November 2019. If you already have a Help to Buy ISA you can keep saving in your account until November 2029, with a further 12 months to claim your government bonus towards your first home.
For all current Help to Buy ISA account holders, you can pay in up to £200 each month and the Government will top up your savings by 25% (up to £3,000) when you buy your first home.
The home you buy must:
- have a purchase price of up to £250,000 (or up to £450,000 in London)
- be the only home you own
- be where you intend to live
To receive the bonus, your solicitor or conveyancer will apply for the extra 25% of which you do not have to pay back.
The Help to Buy ISA can be used with a Help to Buy: Equity Loan.