Government schemes can be a great way for first-time buyers in the UK to step onto the property ladder. These schemes are designed to make home ownership more accessible by reducing the financial barriers that many people face. Here’s an overview of the key government schemes available:
1. Help to Buy: Equity Loan
What it is:
The Help to Buy Equity Loan scheme is available to first-time buyers and existing homeowners looking to buy a new build home.
How it works:
The government lends you up to 20% (40% in London) of the cost of a newly built home. You need at least a 5% deposit and a mortgage to cover the remaining amount.
Repayment:
The loan is interest-free for the first 5 years. After that, interest is charged at 1.75% per annum, increasing each year by the RPI plus 1%.
Eligibility:
The scheme is available on properties costing up to £600,000 in England. Similar schemes exist in Scotland and Wales with different limits.
2. Shared Ownership
What it is:
Shared Ownership allows you to buy a share of a property (between 10% and 75%) and pay rent on the remaining share.
How it works:
You buy a share of the home and pay rent on the remaining part. Over time, you can buy more shares (a process known as “staircasing”) until you own 100% of the property.
Eligibility:
This scheme is aimed at first-time buyers, people who have previously owned a home but can’t afford to buy one now, or those renting a council or housing association property.
3. First Homes
What it is:
First Homes is a scheme where new build homes are sold to first-time buyers with a discount of at least 30% compared to market value.
How it works:
The discount applies to the initial purchase and remains with the property when it is sold in the future, ensuring it benefits future buyers.
Eligibility:
This scheme is for first-time buyers who meet specific local authority criteria, such as income caps and local connection requirements.
4. Lifetime ISA
What it is:
The Lifetime ISA is a savings account designed to help people save for their first home or retirement.
How it works:
You can save up to £4,000 a year into a Lifetime ISA, and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Eligibility:
You must be aged 18-39 to open a Lifetime ISA. The money can be used to buy a first home costing up to £450,000 or withdrawn after age 60.
5. Mortgage Guarantee Scheme
What it is:
The Mortgage Guarantee Scheme is designed to increase the availability of 95% mortgages.
How it works:
The government provides lenders with a guarantee on mortgages where the buyer has a deposit of 5%. This scheme helps buyers secure a mortgage with a small deposit.
Eligibility:
The scheme is open to all buyers purchasing a main residence costing up to £600,000.
6. Right to Buy
What it is:
Right to Buy gives council tenants the opportunity to buy their council home at a discount.
How it works:
The amount of discount you receive depends on how long you’ve been a tenant and the type of property you’re buying (house or flat).
Eligibility:
You must be a secure tenant of a council property in England, and have been a public sector tenant for at least three years.
7. Rent to Buy
What it is:
Rent to Buy is a scheme where tenants rent a home at a reduced rate with the option to buy it later.
How it works:
You rent a newly built home at a discounted rate (usually 20% below market rate) for a set period, giving you the chance to save for a deposit and buy the home later.
Eligibility:
This scheme is aimed at first-time buyers and those who cannot afford to buy a home right away.
These schemes offer various ways to support first-time buyers in achieving home ownership. It’s important to research each option thoroughly and seek advice to determine which scheme best suits your financial situation and home-buying goals.