Help to Buy scheme launched by the government in London

Help to Buy scheme launched by the government in London

With the rising cost of homes in London, it is becoming more difficult for people to buy. Most affected are first-time home buyers, who tend to be younger and have limited incomes.

To help these potential buyers achieve their desire to own property, the government has set up the Help to Buy scheme. This article looks into how the scheme works and the criteria for qualification.

What is the Help to Buy scheme?

The Help to Buy programme is the government's vehicle to lend first-time home buyers funds to purchase a home. It is a path to full homeownership with only 5% of the sale price required as a deposit. The scheme was launched on April 1st, 2021, and will run till March 2023. Over 300,000 homeowners have benefited from the programme.
Only homes constructed by participating builders qualify. Applicants can apply anytime, provided they are eligible. However, if you apply between January and March, you pay slightly less interest on your loan.

To ensure the scheme achieves its aim of assisting homebuyers who are unable to access affordable loans due to having low deposits, there are several conditions, which include:
An applicant must be older than 18 years and be a first-time buyer
An applicant may not own a home or land in the country or anywhere else in the world now or in the past
An applicant cannot own a home jointly with other people or inherited
An applicant cannot be a spouse to, or be in a cohabiting relationship with anyone who owns or used to own a home or land in any part of the world
The home cannot be a second one or meant for rental purposes
An applicant who is married or cohabits with another person must make a joint application with the spouse or partner
The home must be a new-build in England

Apart from helping first-time buyers get their homes, the Help to Buy will help to increase the number of new-build homes.

Are there limits to the sale prices of the homes that qualify?

There are limits, and the amount depends on the region. For example, homes costing less than £407,400 qualify in the East while the limit is £261,900 in East Midlands. Applicants in the North East will have to look for a home under £186,100 while South East first-time buyers can go as high as £437,600.

How does the Help to Buy scheme work?

The applicant is required to put up 5% of the sale price for the home. The government provides up to 20% (40% for London properties) as a loan. A mortgage provides the remainder.

While the government portion of the loan remains interest-free for five years, you will be charged a 1.75% on the 6th year, which will increase by the Consumer Price Index(CPI) plus 2%. You are required to repay the equity loan within 25 years or earlier if you sell the home.

Be aware that the amount you owe on the equity loan increases when the property's value rises. In the same way, if the value of the property drops, your equity loan reduces.

How to apply for the Help to Buy scheme

The first step is to reserve a new build with a builder registered in the scheme. Then register online through the Help to Buy agent covering your region, who will assess whether you qualify and issue you an Authority to Proceed.

With approval from the agent, you can apply for a mortgage and process the contract paperwork. When the home is completed, your Help to Buy agent will provide a Transaction Confirmation which enables the home builder to get the funds. The legal side of the transaction is deemed complete. After this, your Help to Buy agent will transfer your details to the equity loan administrator, who will manage your account until you have paid off the loan.

Conclusion

If you are also a first-time buyer who is looking to buy a property, then visit our website to explore the newly built properties in and around the UK. Also, if you want to know anything about the Help To Buy scheme or need any other information then please do not hesitate to contact us.

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