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

Help to buy- klucze do nowej nieruchomości

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

Help to buy- klucze do nowej nieruchomości
End of Help to Buy program

What was Help To Buy program?

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

Unfortunately, the Help to Buy scheme has been closed at the end of October 2022. Last purchases must be made by March 31, 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: ownyourhome.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 rest of the shares are bought by the landlord, to whom you pay monthly rent
  • 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 mortgage with your own contribution, which is usually 10% of the purchased part
  • 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 both a new property (any) as well as from the secondary market, but you must use the 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:

  • You earn less than £80,000 a year or £90,000 a year living in London
  • You cannot afford your own contribution and loan installments 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. 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 can’t own another property
  • Your affordability must allow you to borrow a minimum of 50% of the value of the property
  • Your total household income must not exceed £80,000 per year, while if you live in London, the limit is £90,000 per year
  • Some councils also introduce priority groups that are more likely to receive assistance. These are people with the lowest income, key workers from certain industries or residents of certain areas.
  • The property you choose cannot be worth more than £420,000 in London and £250,000 in other parts of England
  • 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 set up by people between 18 and 40 years of age, while contributions can be made up to the year in which 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, during the entire period of maintaining the account you can receive up to £ 32,000 pounds.

However, it must be said that this is not simply a savings account with a very high interest rate. This is a program dedicated to people buying property with a mortgage, so if you withdraw money for another purpose, such as buying a car, a penalty of 25% will be charged. The exemption from this fee can be used by people over 60 years of age.

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 adds up)

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

It is not difficult to notice that assistance programs such as Help to Buy are dedicated primarily to those who do not yet own property, earn less than £ 80,000 a year and intend to finance the purchase with a mortgage. 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.

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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

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