End of Help to Buy program. 3 alternatives you need to know!

The purchase of property involves a lot of money, which is why the British government has introduced several assistance programs for borrowers. Help to Buy: Equity Loan closed to new applications in October 2022, so it is worth looking at other options. In this article I will present you some interesting alternatives.

What was the Help to Buy scheme?

The Help to Buy scheme was a government aid scheme. It was created so that people deciding on their first mortgage did not have to collect funds for their own contribution in full (minimum requirement 5%).

Unfortunately, Help to Buy: Equity Loan in England closed to new applications on 31 October 2022. The original completion deadline was 31 March 2023, with approved extensions allowing final completions until 31 May 2023. If you want to learn more about this program, I invite you to read the information on Moneyhelper website, GOV.UK and ours.

What are the alternatives to HTB?

Fortunately, the Help to Buy scheme is not the only aid scheme. Of course, each of the alternatives has its own specifics and differs from HTB, but together with our advisors we may be able to find something for yourself.

Shared Ownership Scheme

Shared ownership is a solution for people who are not able to take a loan for the entire property. This program involves buying a house or apartment through the shared ownership scheme. You buy a share of the property and pay rent to a landlord on the rest. For example, if you become the owner of half of the shares, the landlord rents you the other part of the apartment, charging you a rent fee. If you buy 75% of the property, the rent will fall, but it will involve a larger mortgage to pay back. (source: GOV.UK)

When thinking about shared ownership, you must remember that:

• You can buy between 10% and 75% of the total value of the property

• The landlord owns the remaining share, and you pay them rent on it

• You usually pay monthly fees related to the lease of the property, such as ground rent or contributions for the maintenance of common areas

• The rules for shared ownership in Northern Ireland, Scotland and Wales differ from those in England

• You can buy shares for cash or with a mortgage and your own contribution, which is usually between 5% and 10% of the share you are buying

• In the future, you can buy further shares in your home. This is the so-called staircasing

• Buying shares results in lower rent

• Unlike Help to Buy, you can buy a newly built shared ownership home or an existing shared ownership home through a shared ownership resale scheme

• A landlord can be a housing association, a local council or another organization

You can apply if you meet both conditions at the same time:

• Your household income is £80,000 a year or less (£90,000 a year or less in London)

• You cannot afford your own contribution and mortgage payments for a property that meets your needs.

You must also meet one of the following conditions:

• This is your first purchase, or

• You already had a property, but you can’t afford to buy a new one, or

• You are starting a new household, e.g. after a divorce, or

• You already own shared ownership property and want to move, or

• You own a property you want to move out of, but you can’t afford a new one

You can find more about this program on the government website.

First Homes scheme

For people buying their first home, the government has prepared a discount program. First Homes are sold at a discount of at least 30% (and up to 50%) of market value. As with Help to Buy and other programs, you need to meet certain conditions to get help:

• The property must be newly built by the developer or previously owned by someone who participated in the First Homes scheme

• The property must be located in England

• You must be a first-time buyer (if buying jointly, all buyers must be first-time buyers)

• A mortgage must fund at least 50% of the discounted purchase price

• Your household income must not exceed £80,000 per year, or £90,000 per year if the property is in London

• Some councils may also set local priority criteria for the first 3 months of sale, for example for key workers, people who already live in the area or people on lower incomes.

• After the discount, the first-sale price must not exceed £250,000, or £420,000 in London; a council may set a lower cap. A mortgage must fund at least 50% of the discounted purchase price

• When selling a property for which you received a discount, you must grant a discount of the same value (calculated as a percentage).

The whole procedure involves a certain amount of formalities, but it does not matter! Our advisors will be happy to help you and answer all your questions. If you want to read more about the First Homes Scheme, I recommend the government website. You will also find some valuable information in the article about First Time Buyers.

Lifetime ISA

Another program is Lifetime ISA, which, unlike previous proposals, is based mainly on saving. The Lifetime ISA can be opened by people aged 18 or over but under 40, while payments can be made until they turn 50. The maximum amount you can deposit is £4,000 per year, which will be increased by 25% as a bonus from the government. As it is not difficult to calculate, you could receive up to £32,000 in government bonuses in total (£1,000 a year if you open the account at 18 and pay in the maximum every year until you turn 50).

However, it must be said that this is not simply a savings account with a very high interest rate. It is designed for saving towards your first home or for later life, so if you withdraw money for another purpose, such as buying a car, a penalty of 25% will be charged. There is no withdrawal charge if you use the money to buy your first home (when the conditions are met), if you are 60 or over, or if you are terminally ill with less than 12 months to live.

Using Lifetime ISA is a good idea if:

• You do not plan to buy a property in a few months, but for example in a few years

• You are a First Time Buyer

• You are planning to take a mortgage

• You have a partner with whom you can save in parallel (bonuses add up)

You can read about the program on the government website and in the inews article.

It is not difficult to notice that schemes like these are aimed mainly at first-time buyers, and some have income limits (for Shared Ownership and First Homes, £80,000 a year, or £90,000 in London). If for some reason you can’t get public aid, that’s okay! Our advisors will not only choose a mortgage for you that will meet your expectations, but also help with formalities and answer all your questions.