The Help-to-Buy Scheme: A Guide for First-Time Homebuyers
Buying your first home can be a daunting process, especially when it comes to financing. Fortunately, the UK government offers a scheme to help first-time homebuyers get on the property ladder. This scheme is known as the Help-to-Buy scheme, and in this blog post, we'll explain what it is and how it works.
What is the Help-to-Buy Scheme?
The Help-to-Buy scheme is a government initiative that aims to help first-time homebuyers purchase a property with as little as a 5% deposit. The scheme is available to both new-build and existing properties and is open to anyone who has never owned a property before or who has not owned a property in the last three years.
How Does the Help-to-Buy Scheme Work?
Under the Help-to-Buy scheme, the government provides a loan of up to 20% of the property's value (40% in London) to be used as a deposit. This loan is interest-free for the first five years, after which interest is charged at a rate of 1.75%. The remaining 75% of the property's value is covered by a mortgage from a lender of your choice.
For example, if you were buying a property worth £200,000 under the Help-to-Buy scheme, you would need a deposit of just £10,000 (5% of the property's value). The government would then provide a loan of £40,000 (20% of the property's value), leaving you with a mortgage of £150,000 (75% of the property's value).
Who is Eligible for the Help-to-Buy Scheme?
To be eligible for the Help-to-Buy scheme, you must meet the following criteria:
- You must be a first-time homebuyer or have not owned a property in the last three years.
- The property you're purchasing must be a new-build or an existing property worth less than £600,000.
- You must have a deposit of at least 5% of the property's value.
- You must take out a mortgage for at least 25% of the property's value.
It's also worth noting that the Help-to-Buy scheme is only available until 2023, so if you're interested in taking advantage of it, now is the time to act.
Conclusion
The Help-to-Buy scheme can be a great way for first-time homebuyers to get on the property ladder. With a low deposit and an interest-free loan from the government, it can make purchasing a property more affordable and accessible. If you're interested in the scheme, we recommend speaking to a financial advisor or mortgage broker to see if it's right for you.