Three-minute read to help you consider the Help to Buy
Scheme from all angles.

The Help to Buy scheme is a government-backed equity loan
opportunity. It is also referred to as ‘shared equity’.

The scheme is currently only available on new build
properties. The loan from the government is up to 20% of the purchase price (40%
in Greater London). This means that you only need to raise a 5% deposit and get
a 75% mortgage (55% in Greater London).

Let’s consider the benefits and downsides of using this
option.

Pros

Although this can be called a ‘shared equity’ scheme, you
will own the property 100% outright.

This low deposit amount is what can make the scheme
appealing to many. It allows you to get onto the property ladder often much
quicker than if you had to save for a 10% or more deposit. It’s also cheaper
than getting a 95% mortgage, which is what you’d have to do without the scheme.

The first five years of the loan are interest-free and there
is no maximum household income cap.

You have 25 years before it has to be paid back in full.

Cons

There isn’t a household income cap but there are regional
price caps. For example, in the North West, you couldn’t purchase a property
for more than £224,400 using this scheme. In London, you couldn’t spend over
£600,000.

The first five years are interest-free but after that, you’ll
be charged an annual fee of 1.75% on the outstanding loan amount. This fee goes
up each year with inflation. The loan becomes more expensive over time but your
wages may not increase at the same rate.

When you sell the property, you must pay off the loan in
full. However, because the loan is a percentage of the market value of your
home, the loan amount may end up being more if your home has gone up in value. This
might mean that you are left with a lot less from the property sale than you
would have otherwise had. This can make upsizing harder as you’re not scaling
the property ladder in a linear manner.

It’s important to seek specialist financial advice if you
are looking to take advantage of the Help to Buy scheme. We can recommend
trusted independent financial advisers and mortgage specialists.

If you would like some support to explore what route to take
when buying your first Kent
home, don’t hesitate to get in touch with us on 01634304326.