Which first-time buyer government scheme suits you best?

21st August 2019

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In the UK property market right now there’s something of a collision of forces.

On the one hand, first-time buyers are on the rise, according to the latest figures from UK Finance. In May 2019, the number of first-time buyer mortgages was up 0.5% compared to the same month last year. (1)

Yet it’s getting more and more expensive to get on the property ladder. The average cost of a house bought by a first-time buyer has risen by 47% in 10 years, while average incomes have grown by just 18% over the same period. (2)

But don’t despair. There are a number of government-backed schemes to help you buy your first home.

The choice can be bewildering and some are due to end. So here’s a quick guide to what’s on and off the menu.

Help to Buy Equity Loan

This popular scheme has helped thousands of first-time buyers get the keys to their own home.

The premise is simple: you come up with a 5% deposit, and rather than taking out a 95% mortgage, you borrow 20% of the remaining balance from the government - helping to minimise your mortgage repayments.

Of course, you’re taking on two debts, but the terms of the equity loan tend to be more agreeable than a full-stack mortgage.

Bear in mind that Help to Buy is scheduled to come to an end in 2023, though there are rumours that the government could extend it further.

Help to Buy ISA

The Help to Buy ISA is designed to help first-time buyers struggling to save up a deposit.

You can save up to £1,200 in the first month of taking out the ISA, then up to £200 a month afterwards, and the government will top it up with a 25% payment.

The maximum amount the government will hand out is £3,000, though it’s a great help towards your deposit.

You can put your savings towards a home worth up to £250,000, or £450,000 if you’re buying in London.

The scheme ends on 30 November 2019, so move fast if you want one!

Lifetime ISA

A longer-term option is the Lifetime ISA (LISA).

With this scheme, you put up to £4,000 a year into your ISA account and the government will add a 25% top-up, to a maximum of £1,000 a year.

There’s no limit to how much you can save over the lifetime of the offer, and you can keep on saving up to the age of 50.

There are, however, restrictions on how and when you can withdraw your funds.

Shared Ownership

For those struggling to get a ‘traditional’ mortgage, Shared Ownership might be for you.

You get to own a share of your home - often between 25-75% ­- and borrow the money to buy it. As well as paying back the loan, you pay rent at a reduced rate.

You can continue to buy more shares in your home, right up to the full 100% mark.

Which one’s right for you?

Which of the government schemes would be best for you depends entirely on your circumstances.

“The Help to Buy loan is perfect if you’ve got a deposit, but are hamstrung by not being able to secure a 95% mortgage,” said Prakash Patel, a Trussle Mortgage Adviser.

“Either one of the two ISA-based schemes could suit you if you need a helping hand with boosting your bank balance.

“And if money’s tight, you could consider Shared Ownership. It’s an affordable way to get on the property ladder and you could own all your own home eventually.”


1. UK Finance

2. Santander

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