Government-backed help to buy schemes could help you with saving for a deposit and buying a home.
Types of Help to Buy scheme
Government-backed Help to Buy schemes help people to buy a home.
These schemes are intended only for a home that you live in. They can't be used to buy a second home or a property for renting.
You own 100% of a home you buy through one of these schemes.
If you are a first-time buyer, you can also save for a home using a Help to Buy ISA.
Help to Buy: ISA
When you save money into a Help to Buy ISA, the government boosts your savings by 25%. For example, if you save £200, the government adds £50.
It is only available to first-time buyers. You can only use it to buy a home worth under £250,000 or under £450,000 in London.
The maximum bonus that savers can receive is £3,000. Your solicitor or conveyancer applies for the bonus when you buy your first home.
Shop around for a Help to Buy ISA, as different banks and building societies offer different rates of interest.
Find out more from Help To Buy about Help to Buy ISAs.
Help to Buy: mortgage guarantee scheme
You don't have to be a first-time buyer to qualify for the mortgage guarantee scheme. You apply directly to any mortgage lender taking part in the scheme.
You have to pay a deposit of between 5% and 20% towards the cost of a home. A mortgage lender provides a mortgage for the remaining 80% to 95% of the purchase price.
You can choose any home offered for sale on the open market up to a maximum of £600,000.
The government gives a guarantee to your mortgage lender that enables the lender to take on the risk of allowing you a mortgage.
If you default on your mortgage, the government will cover your lender's losses up to 15% of the purchase price.
You are responsible for paying your mortgage and your home could be repossessed if you don't.
Find out more about Help to Buy Help to Buy mortgage guarantees from Gov.uk.
Help to Buy: equity loans
A Help to Buy equity loan can only be used to buy a newly built house or flat up to the value of £600,000.
The government or a private developer loans you up to 20% of the price of the home you want to buy. You get a repayment mortgage to pay for the rest, up to a maximum of 75%.
To apply for a Help to Buy equity loan, you don't have to have a deposit, but most lenders will only give you a mortgage if you have a deposit of at least 5%. You must be able to prove that you can afford your mortgage repayments and other costs of owning a home.
The equity loan is interest free for the first five years. After that you pay an annual fee, which can be paid in monthly instalments
The loan must be paid in full by the end of the mortgage period or when the property is sold, whichever happens first. The amount you pay back depends on how much your home is valued for. If your property goes up in value by 20%, you'll repay 20% more on your loan.
To check for properties available in your area and to apply for an equity loan, contact a government-appointed Help to Buy agent.
Find out more from Gov.uk about Help to Buy equity loans.
Help to Buy in London
From 2016, if you live in London the London Help to Buy scheme offers a 40% equity loan. This can be used to buy a new build home.
You are responsible for paying the mortgage on your home.
Your home could be repossessed if you don't.
Your rights and responsibilities depend on the type of home-ownership scheme you have.
Find out more about homeownership schemes.
Last updated 12 Apr 2016 | © Shelter