May 9, 2024

What is Help to Buy and Who Qualifies for It?

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What is Help to Buy and Who Qualifies for It

What is Help to Buy and Who Qualifies for It?

In today's property market, buying a home can feel intimidating, especially for first-time buyers. Rising property prices and strict lending criteria, mean that potential homeowners can find themselves facing an uphill battle to get onto the property ladder. The government initiative, Help to Buy, has been put in place to make homeownership more accessible.

What is Help to Buy?

Help to Buy is a government-supported scheme introduced to assist first-time buyers in purchasing a property. It offers various options tailored to different circumstances, giving individuals financial support to make buying a home possible. Since its creation, the scheme has played a vital role in helping numerous individuals buy a property.

Who Qualifies for Help to Buy?

The eligibility for Help to Buy can vary but there are general requirements that applicants must meet to qualify, including:

  1. First-Time Buyers: You must be a first-time buyer. To qualify as a first-time buyer, you must not have previously owned property anywhere in the world. This aims to support those who are new to the property market and might need extra help to purchase their first home.
  2. Property Value Limits: Help to Buy generally put limits on the maximum value of the property you can purchase. These limits change depending on the region, so it's essential to check the specific guidelines for the area in question.
  3. Deposit Requirements: One of the main benefits of Help to Buy is the option to purchase a home with a lower deposit. For example, the Equity Loan scheme allows eligible buyers to borrow a percentage of the property's value, reducing the upfront deposit. It’s worth noting that applicants still need to show their ability to afford mortgage repayments.
  4. Income Criteria: Some Help to Buy initiatives have income restrictions to ensure that help is focused on those who genuinely need it. These criteria may vary depending on the specific scheme and the number of people buying the property.
  5. Intention to Live in the Property: Help to Buy is intended to support individuals in purchasing a home to live in, rather than as an investment. This means that applicants must demonstrate their intention to live in the property as their primary residence.

How Does Help to Buy Work?

There are various routes to Help to Buy, each with its own set of rules and benefits. The most common initiatives include:

  1. Equity Loan: This scheme allows eligible buyers to borrow a percentage of the property's value (typically 20% in England and as much as 40% in London) from the government. The buyer then contributes a deposit of at least 5%, and the remaining balance is covered by a mortgage. The loan is interest-free for the first five years, making homeownership more affordable.
  2. Shared Ownership: Shared Ownership enables buyers to purchase a share of a property (usually between 25% and 75%) and pay rent on the remaining amount. Over time, buyers have the option to buy additional shares in the property until they eventually own it outright.

Help to Buy has been a crucial lifeline for many people looking to buy their first home. It provides essential support to overcome the financial obstacles to owning a home. If you need help with conveyancing, contact our experts today at Bespoke Law.