The Help to Buy Equity Loan Scheme has been around since 2013 and has allowed first time buyers to buy a new build home with a deposit as low as 5%. It has enabled buyers to get a 20% Equity Loan from the government (40% in London) to cover the sale price.
According to Homes & Property in August 2020, over 270,000 properties have been bought with the Help to Buy Equity Loan scheme since the scheme started.
So, what is Help to Buy?
Help to Buy is a scheme available to first-time buyers looking to move. The Help to Buy Equity Loan is a government-backed scheme. The government provides a loan of up to 20%, or up to 40% in Greater London, of the property value you intend to purchase. This means you would only need to save a 5% deposit and arrange a 75% mortgage, or 55% in Greater London, instead of your typical 90% mortgage.
Help to Buy Eligibility
There is a criteria which you need to meet to be able to apply for Help to Buy.
- You must be a first time buyer and your new build home must fall within the Regional Price Cap
- To apply for the Help to Buy Equity Loan you must have a deposit of at least 5% of the purchase price and arrange a repayment mortgage of at least 25% of the purchase price. You should be able to afford the repayments on the equity loan, your mortgage, as well as your other outgoings.
How does Help to Buy differ from Shared Ownership?
Both Help to Buy and shared ownership give you the opportunity to get on the housing ladder affordably with a smaller and more manageable deposit. They are both also similar in the fact that parts of the homes are owned by either the government (help to buy) or the housing association (shared ownership). The main difference is that you would pay both rent and mortgage payments with a shared ownership property whereas you would only pay mortgage payments on a help to buy property.
Shared ownership may be cheaper in the first instance as the deposit is only on the share of the property you are buying. However, if you are wanting to own your home from the start, Help to Buy may be the option for you if you can afford to pay the mortgage for the whole property rather than a share.
Both of these schemes have their drawbacks and benefits. What will be a better option for you is entirely personal.
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