It feels like an adage as old as time, but ‘it’s not easy getting on the property ladder’ is actually something that only started being uttered relatively recently.
For many of our parents and grandparents, buying their own house was simpler than it is today. That is not to say that it was a piece of cake. But it was certainly less expensive, and potentially the vision of a ‘dream house’ has changed somewhat with the passing of time.
The market has changed substantially too, meaning that in this day and age, securing that first home is a tricky ask. Throw a global pandemic into the mix and you are asking for trouble.
From the perspective of the government however, there is a perpetual need to ensure a strong and flourishing housing market. This has led to a number of initiatives to stimulate growth and investment in this sector, with some designed specifically to support first-time buyers.
One such initiative is the Help to Buy scheme. This has seen a revamp recently, and has been heralded as a potential lifeline for first-time buyers. We decided to take a look at what all the fuss is about.
What’s the story behind Help-to-Buy?
Help to Buy was first introduced by chancellor George Osborne back in 2013. It was essentially a range of schemes set up to boost the housing market by supporting people seeking to purchase residential properties, enabling them to buy new builds.
These schemes include equity loans, mortgage guarantees, shared ownership and new buy, as well as the help-to-buy ISA and lifetime ISA.
Though Help to Buy has undoubtedly, like Ronseal, helped many people do as it says on the tin, it has had the side effect of inflated house prices.
This in turn has meant that as new generations of potential home owners seek that first step onto the housing ladder, more capital is required on their part to make this so.
This means that revisions and changes to Help to Buy have had to be made in order to enable first-time buyers in particular to take that step.
What’s changed recently with help to buy?
The new version of Help to Buy, which is set to run from April 2021 to March 2023, will see an equity loan of between 5% and 20% offered to first-time buyers for new build properties. In London, this loan can go up to 40%.
In a crucial difference however, this loan will only be available to first-time buyers who have not owned a property in the UK or abroad before. The big difference here is that only first-time buyers are able to capitalise in the equity loan, whereas previously Help to Buy has been open to people already on the property ladder.
There is a maximum property price for which you can use the scheme, and this varies pretty drastically depending on the location in which you are looking to buy. In London, the loan can be used for properties up to £600,000, while in the north-east it is only available for properties up to £186,000.
As an extra incentive for first-time buyers, the loan is interest-free for the first five years. From the sixth year onwards, interest of 1.75% will be charged, and this is then multiplied by the consumer price index each year, plus an additional 2%.
The equity loan needs to be paid back either once the mortgage is repaid, upon the sale of the property, or once 25 years has passed.
A good deal for contractors and freelancers?
If you are a contractor or freelancer that has faced challenges getting onto the market, then the new equity loan as part of the Help to Buy scheme could be advantageous to you.
This is particularly the case if you are keen on a new build you can call your own, but would rule out any older properties that may take your fancy.
Your location is also an important factor to consider, as well as whether taking out a Help to Buy loan is right given your specific circumstances.
This is why specialist contractor mortgage advice and freelancer mortgage advice should be sought if possible. This helps you avoid making decisions that could prove problematic in the long run.
However, if you are desperate for 2021 to be the year you get on the property ladder, then the new help-to-buy could be a real boost for your plans.
