First-time buyers are warned that they only have weeks left to apply for the Help to Buy scheme before it closes forever.
Help to Buy allows savers to purchase a house by using a Government equity loan to help out with their deposit. The idea behind it is that you are able to have a smaller deposit while still landing yourself on the property ladder.
However, the Government loan must be paid back, with interest.
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The Mirror reports that you must have a five per cent deposit for the desired property to use the scheme, with the Government then lending you up to 20% of the property price (or 40% in London where housing is considerably more expensive). But the scheme is closing for applications indefinitely at 6pm on October 31 - with Help to Buy ending on March 31 next year unless extended.
Figures show that since 2013, almost 340,000 homes have been purchased successfully using the equity loan scheme. Here's a brief explainer on how it works, and what other support is available to first-time buyers.
Help to Buy explained:
Help to Buy is at present only available on new-build properties, and there is a maximum property value eligible for different regions in England. For example, in the North East, the maximum property price for buying is set at £186,100 - rising to £600,000 if you're purchasing property in London.
The scheme is only available to those buying homes in England, however, a similar version is also available in Wales.
Here is a breakdown of the regional price caps from highest to lowest:
- London: £600,000
- South East: £437,600
- East of England: £407,400
- South West: £349,000
- East Midlands: £261,900
- West Midlands: £255,600
- Yorkshire and The Humber: £228,100
- North West: £224,400
- North East: £186,100
You'll have to start paying interest on the loan after five years, at a rate of 1.75 per cent, so keep in mind this added cost to your mortgage repayments.
Other first-time buyer schemes:
With a Lifetime ISA (LISA) account, you can get a free 25% boost from the Government if you're saving for your first home or retirement. You can save up to £4,000 each tax year, meaning the maximum bonus you can pocket is £1,000.
The maximum bonus is £33,000 if you open it at 18, and max it out until you turn 50 - you can’t pay into a LISA beyond the age of 50. Anyone who is aged 18 to 39 can open a Lifetime ISA for free - and if you're in a couple, you can open one each.
You'll pay a penalty and lose your bonus if you take money out of your LISA account for anything other than your first home or retirement.
Help to Buy ISA accounts closed to new savers on November 30, 2019 - but if you’ve already opened an account, you can keep saving until November 30, 2029. You must also claim your bonus by December 1, 2030.
When they first launched, you could open an account with a maximum of £1,200 but after that you're limited to saving £200 a month into it. The Government then tops up your savings with a 25% bonus - the maximum you can get free is £3,000, and you'd need to save £12,000 to get this.
Through this initiative, savers can put down a five per cent deposit and the Government acts as a guarantor if they miss a payment. But, while the scheme is marketed at first-time buyers, it’s not just limited to those hoping to get on the ladder for the first time.
Guarantor mortgages will be available to anyone buying a property costing up to £600,000, unless they are investing in buy-to-let or second homes. Critics of the scheme point out that you’ll save money in the long-run if you can afford a bigger mortgage.
Some lenders also offer five per cent mortgages outside of the Government-backed scheme that may be cheaper for borrowers.
This is where you buy a share of a property - between 25% and 75% of the property value - and pay rent on the rest. The share you can buy is usually between 25% and 75% but can be as low as 10% on some homes.
You can buy additional amounts under what's known as 'staircasing' which is where you slowly increase the amount of the property you own. Shared ownership isn’t limited to first-time buyers, but to be eligible, you need to have an individual income no greater than £80,000 a year or £90,000 a year in London.
Your combined income can't be greater than these caps if you're buying as a couple.
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