House prices in London are ridiculous, especially when you consider how little you actually get for your money; but luckily there’s two schemes in place which make affording your first home – whether that be in London or elsewhere in the UK – that little bit easier.
I bought my one-bed, zone four flat in May 2019 using the London Help to Buy scheme and I cannot recommend it enough, especially to single buyers.
I was 24-years-old and looking to buy, which at the time felt impossible to do by myself, so I decided to book an appointment with a mortgage advisor to discuss my options, and it was then that I was told about the Help to Buy scheme (not to be confused with the Help to Buy ISA).
Buying through Help to Buy means that you own a percentage of your home (60% in London or 80% elsewhere), thus you can afford to buy something bigger than a garage. And best of all, unlike Shared Ownership you don’t pay rent on the percentage that you don’t own. Instead, think of it as if you’re buying with the government and they’re your boyfriend/girlfriend. A boyfriend/girlfriend which you don’t pay interest to for five years; which brings me onto my next point…
Help to Buy also has a cheeky loop hole – there is nothing in the contract saying that you have to pay any interest if you decide to move out before the end of the five years, making the scheme the perfect opportunity for first-time buyers to get onto the property ladder and not be tied down if you find yourself able to afford to size up in lesser years.
I’m personally looking to size up and buy with my boyfriend at some point in late 2021-early 2022, dependent on how things stand after the current pandemic.
Other perks of Help to Buy include that you only need a minimum of 5% deposit – something which can often be a struggle for young people to save up, especially if you’re currently renting.
However, it is important to note that the maximum [mortgage] you can borrow when buying through Help to Buy is £120,000 and up to £240,000 for London properties – so dependent on the value of the home you’re looking at, you may need to pitch in a bit more than 5% deposit. The easiest way to work out the maths is by making an appointment with a mortgage advisor.
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Who is eligible?
Currently, anyone can buy a home using the Help to Buy scheme, whether you’re a first-time buyer or someone looking to relocate, as long as you don’t own any other property. However, as of April 2021 the scheme is changing and will only be available to first-time buyers.
What size home can I buy?
When searching the market you’ll notice that Help to Buy is only available on new builds with a price tag of up to £600,000.
(Note: the property listing will also state that it is available under Help to Buy – not all new builds are included)
How does the interest work?
You’ll have five years interest free on the Help to Buy equity loan (the percentage of the property you don’t own and are borrowing from the government), in which time if you decide to sell and relocate you won’t owe any interest – you simply just pay back the value of that loan using the new market price of your home.
If you decide to stay living in your Help to Buy property after the five years, you will be required to pay an interest fee of 1.75% of the amount of your loan at the time you purchased your property. This interest rate will then continue to rise each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%.
In other words, I recommend using Help to Buy to get onto the property ladder and then selling at the end of the five years.
Are there any hidden charges?
Only a monthly management fee of £1.
What else should I know about Help to Buy?
Unfortunately, if you buy a home using Help to Buy you won’t be able to sublet or part exchange it. This rule has been put in place to ensure that only genuine buyers who need help getting onto the property ladder are able to take advantage of the scheme – which lets be fair, is a good thing.
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