Government Schemes – Knowledge Bank

Government Schemes

We are keen to ensure all first time buyers know what options they have available to them – read my blog below for information on the schemes offered and may be available to you. 

By: Kathryn Foy, Office Manager and Business Case Handler at Open Vision Finance. 

So you have been thinking about purchasing your own home, however perhaps you have been lead to believe that this is something that is out of your budget and this is hindering your decision to stop thinking and start acting…? Well let me reassure you that there is help out there, as, believe it or not the government are keen to get first time buyers on the property ladder and they have introduced a number of government schemes that are aimed to propel this side of the property market.

Let me breakdown the eligibility criteria and what each scheme offers:

Help to buy: Equity Loan

• Government Schemes available in England Only
• Extended End Date of scheme – until 2023
• From 2021 the scheme will be for first time buyers only
• You could borrow up to 20% of the cost of the new build home from the government on homes up to £600,000
• Interest free for the first 5 years
• You’ll need a 5% cash deposit (20% equity loan from the Government), leaving a 75% mortgage to make up the rest

Please note – there is a separate scheme that is in place for purchases in London.  Please contact is for further information if you are purchasing in this area.

Forces: Help to Buy

• To be eligible you must be a serviceman or servicewoman who has; completed the pre-requisite length of service, have more than six months left to serve (at the time of application) and meet some medical categories
• Can borrow up to 50% of your salary, interest free, to; purchase your first home, move to an alternative home due to assignment or as family needs/circumstances change
• Maximum amount eligible under the scheme to be borrowed (interest free) is up to £25,000
• This amount can be used for deposit, other related purchase and sale costs, and estate agents fees – if applicable.

Help to Buy: ISA

• Must be a UK resident, over the age of 16
• Have a valid National Insurance number
• First time buyers only and must not own a property anywhere in the world
• The Help to Buy ISA is for an individual, not each household – this means if you are buying with a partner, you can both receive your own government bonuses
• Save up to £200 per month and the government will boost this by 25%
• The maximum bonus you can receive is £3,000 – based on you having saved £12,000
• The minimum bonus which can be claimed is £400 – so you will need to have saved £1,600 before you can claim this
• You can use it to buy any home worth under £250,000 (or under £450,000 in London)
• Help to Buy ISAs will be available to open until 30^thNovember 2019. They won’t be accessible to new savers after this date, as long as you opened the Help to Buy ISA before 30^thNovember 2019 you can continue saving into the account.
• You must claim your bonus by 1^stDecember 2030

Help To Buy: Shared Ownership

• Government Schemes available in England Only
• You must be either a first time buyer, you used to own a home but can’t afford to buy at full market value one or are an existing shared owner looking to move
• Ability to purchase a share of a home, between 25% and 75% of the home’s value
• You will pay rent on the remaining share not purchased
• Ability to purchase bigger shares in the property when you can afford to do so (this is called stair casing)
• Household needs to earn £80,000 per annum or less (£90,000 per annum or less in London)
• You can purchase new build properties (with shared ownership permissions) or apply to purchase an existing one through any resale programmes from your local housing associations
• The shared ownership property will be purchased on a leasehold basis (and usually transferred to freehold upon purchase of 100% of the property)

If you have a long-term disability and are a first time buyers, there is a shared ownership scheme known as the HOLD – Home Ownership for People with Long-Term Disabilities.  For more information in relation to this specific scheme, please get in touch.

 If you are aged over 55 and are a first time buyer, there is a shared ownership scheme known as OPSO – Older People’s Shared Ownership. For more information in relation to this specific scheme, please get in touch.

Starter Homes

• A scheme coming soon
• Government Schemes available in England Only
• First time buyers only, aged between 23 and 40 years of age
• New build homes can be purchased at a discount of at least 20% below market value
• Purchase price of the property will need to be under £250,000 outside of London and £450,000 inside London
• Income will need to be less than £80,000 combined (£90,000 in London)
• The purchase will need to be with a mortgage (cash purchases are not eligible)
• Restrictions – if the home is sold within the first five years of purchasing, you will need to repay some or all of the 20% discount originally applied from the scheme
• THIS SCHEME HAS NOT STARTED YET BUT PLANNING IS UNDERWAY

If you are interested in this scheme you may wish to register your interest by using the link below:

https://www.ownyourhome.gov.uk/scheme/starter-homes/

Right To Buy

• Government Schemes available in England Only
• This scheme enables you to buy your home at a price lower than the full market value, the reduction is based on the length of time you have been a tenant
• The maximum discount available is up to a maximum of £78,600 (unless you live in London which is up to a maximum of £104,900)
• Discount for a house – if you live in a house you can get a discount of 35% after three years. After year four and five, the discount will remain at 35%.  From five years onwards, you will accrue a further 1% for each year of your tenancy (up to a maximum of 70%)
• Discount for a flat – if you live in a flat you can get a discount of 50% after three years. After year four and five, the discount will remain at 50%.  From five years onwards, you will accrue a further 2% for each year of your tenancy (up to a maximum of 70%)
• This scheme will be available to you if you are; a secure tenant of a local authority and non-charitable housing associations
• You will need to have been a tenant for at least three years in the public sector (reduced from the previous minimum five years required)
• During this three years it can include time spent in different homes and with different landlords, as long as it was a public sector tenancy
• If you have any possession order registered against you, if you are an undischarged bankrupt (or have a bankruptcy petition pending against you), or have any arrangements with creditors for money still owed – you will not be eligible for this scheme
• Repayment of discount – you can sell anytime once you have received the discount, however you will have a ‘repayment period’ during which time, some or all of the discount will need to be repaid (this will be based on the sale price, not the original value when discount was initially applied):
  • Selling within the first year = 100% repaid
  • Selling in the second year = 80% repaid
  • Selling in the third year = 60% repaid
  • Selling in the fourth year = 40% repaid
  • Selling in the fifth year = 20% repaid
  • After five years = 0% to be repaid

There are other schemes available for housing association tenants, to include Right to Acquire and Preserved Right to Buy.  For more information in relation to these, please get in contact with us further.

Discounted Sales

• Councils newly built homes can be sold at 25%-50% discount – offered referred to as an Affordable Housing Scheme
• Local connection required to be eligible
• Not offered by all councils and housing associations
• Eligible buyers can purchase a property offered at a discounted price from the full market value
• When the property is sold, the same percentage discount will need to be passed onto the next purchaser – to ensure the ‘discounted sale’ can continue.
• The properties would then be subject to a Section 106 Agreement – which can restrict how the property can be sold and detail eligible purchasers (for example, passing on the same percentage discount and ensuring purchasers with a local connection can only purchase the property)
• Contact your local council or housing association for further information on where affordable housing schemes may be available to you

The mortgages for this type of purchase are a little more complex to arrange (due to the section 106 agreement) and as such, we would highly recommend seeking mortgage advice prior to proceeding, as many lenders do not accept this scheme.

If you have found this article interesting or would like to arrange an appointment with one of our experienced mortgage advisers about the Government Schemes available, please get in touch with us on 01823 444022 or by email to advice@openvisionfinance.com.

Source: https://www.helptobuy.gov.uk/  https://www.ownyourhome.gov.uk