Government homeownership schemes
Learn about homebuying schemes that help you get onto the property ladder
What is a government scheme?
Government schemes can help prospective first-time buyers get onto the property ladder. They are mostly aimed at those who might be struggling to afford the deposit that comes with buying a new home.
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. But average incomes have grown by just 18% over the same period.²
But there are many government-backed schemes to help you buy your first home.
If you're still not sure which government scheme is suitable for your situation, you can find out using our government homeownership tool.
Help to Buy Equity Loan
You come up with a 5% deposit, and rather than taking out a 95% mortgage, you borrow 20% of the rest of the balance from the government. This helps you to lower your mortgage repayments.
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 due to end in 2023. But there are rumours that the government could extend it.
Help to Buy ISA
The Help to Buy ISA was designed to help first-time buyers struggling to save up a deposit.
Those with a Help to Buy ISA could save up to £1,200 in the first month of taking out the ISA, then up to £200 a month afterwards. The government will then top it up with a 25% payment.
The maximum amount the government will hand out is £3,000. This is a great help towards a 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 ended on 30 November 2019, but those who applied before that date can still use their 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. The government will then 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 restrictions on how and when you can withdraw your funds.
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 to 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.
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