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Government Support on the Path to Home Ownership

It’s simply a fact of life that many people wouldn’t be able to be homeowners without some kind of assistance. For some people, that help comes from family or loved ones. Others turn to the government’s available schemes in order to be able to afford owning a home. So, what’s available?

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Help for hopeful homeowners

There are a few obstacles to overcome on the path to homeownership. First you need to save a sizeable deposit, then you’ll need to secure a mortgage deal, and finally you can focus on finding your dream home.

While many people might not have trouble affording monthly mortgage payments –  they are most likely already paying rent, after all – the issue always seems to be saving enough to put a deposit down for a home. Luckily, the government has introduced ways to help.

Help to buy

The new Help to Buy scheme replaced a previous scheme and will run until March 2023. This scheme, exclusively for first-time buyers, introduced property price caps in an effort to get more first-time homeowners onto the property ladder.

Here’s how it works:

  • A minimum deposit of 5% is required
  • You’ll need a plan to repay at least 25% of the property purchase price
  • The equity loan will cover from 5% to 20% of the purchase price of a newly built home (if the property is based in London, you can borrow up to 40%)
  • The equity loan percentage you borrow is used to calculate your interest and equity loan repayments.
  • You have a five year grace period before you’re required to start paying interest and at that point you rate will be 1.75% (applied to the amount originally borrowed.)
  • Interest increases every year at the start of each new tax year in April (calculated by adding 2% to the Consumer Price Index.)
  • You can always reduce your interest payments by repaying part of the equity loan.

Mortgage Guarantee scheme

In April, the government introduced the mortgage guarantee scheme, which enables first-time buyers to purchase a home with as little as a 5% deposit. It’s an incentive for banks and building societies to offer these low deposit mortgages because the government is pledging to support these loans themself by backing the remaining 95% of the purchase price. If you’re eligible, the scheme will allow you to secure a mortgage on a house up to £600,000.

Shared Ownership

Shared ownership gives you the opportunity to buy a share of your home (between 10% and 75%) and pay rent on the remaining portion if you can’t afford the mortgage on the entire price of the home. Whenever you can afford to, you can buy bigger shares of your home.

If your household’s annual income is less than £80,000 (£90,000 or less in London) then you qualify. There’s also a special scheme for people aged over 55, the Older People’s Shared Ownership scheme that lets you buy up to 75% of your home and once you own that amount, you don’t have to pay rent on the rest. Another scheme for disabled people (Home Ownership for People with Longterm Disability) enables you to buy up to 25% of your home.

Need help finding a mortgage?

Whether you’re hoping to buy your next home or simply move up the property ladder, we’re here to help you find and apply for the right mortgage. Get in touch to discuss your options.

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