Government Schemes Available To Help You Buy A Property

Buying property is one of the biggest things you can do, and it’s a huge achievement. But it isn’t easy. Prices are sky high if you want to buy and it’s harder than ever to get onto the property ladder. And that’s why government schemes have been introduced to help first time buyers get on the market.

House prices have risen so much compared to the average income. For example in the 60’s the cost of a home was roughly the equivalent of £62,084, compared to the average income in today’s money of just over £23,500. So most people who bought homes then would have paid off their mortgage relatively quickly and have made some money on it. But the average house price now is a little over £280,000.

If you’re looking to get on the property market here are some government schemes available to help you buy a property.

Lifetime ISA

A lifetime ISA or LISA is an account you can open which can be used towards buying your first home. You must be aged between 18 and 30 to open an LISA which you can save up to £4,000 a year into. But the great thing is the government will add a 25% bonus on everything you save. So if you save the maximum you can get £1,000 free every year.

If you’re purchasing a house with a partner or someone else you can both have an ISA to maximise your bonus. And it can even be used if one person buying is a first time buyer and the other isn’t.

The property you’re buying has to be under £450,000 which won’t be difficult to achieve for most first time buyers. It is worth noting that there’s a penalty for taking money out of a LISA if you’re not putting it towards a house deposit or your retirement. For more information on lifetime ISA’s check out a post I did all about them.

Government schemes no longer available- Help to buy ISA

Now this isn’t a new government scheme available but you may have opened one before November 2019.

It worked in a similar way to a Lifetime ISA where you get a 25% bonus, but you were limited to saving £200 a month, so just £2,400 a year.

You can only use either a help to buy or lifetime ISA towards your deposit. But if you do have a help to buy ISA you can transfer it to a LISA in order to be able to save more and get more of a bonus.

Shared ownership

This is the government scheme I used in order to get onto the property ladder. And it’s especially good if you’re looking to buy on your own.

It works where you buy a share of your home from a landlord (usually a housing association or the council) and you pay rent on the remaining share. Your share could be as low as 25% on a London property for example, or you could own 75% and even staircase up over time to own more. I had a 45% share on my flat and paid rent on the remaining 55%. In total I was still paying less overall in mortgage and rent than I was renting a far worse property before.

Shared ownership is reserved for buyers who couldn’t afford to buy without the scheme so you would need to do affordability checks etc. To qualify for shared ownership in Wales you have to be a first time buyer, buy a home from a participating landlord and have a combined household income of under £60,000.

I’ve done quite a few posts on shared ownership so click here to check them out.

Co-ownership in Northern Ireland

Similar to shared ownership in Northern Ireland you get co-ownership on newly built and older homes. Your ‘starter share’ is between 50 and 90% of the property and you can increase your share in 5% steps any time to stair case. Then you pay mortgage on the portion you don’t own.

Wales have a similar scheme which provides an equity loan for buyers of new-builds up to the value of £250,000. Buyers must take out a repayment mortgage to cover the remaining amount. So you can’t opt for interest only like the equity loan. Which makes sense as when you came to sell you’d owe it all back.

Scotland and Northern Ireland had their own versions of help to buy but applications closed in Feb 2021 in Scotland and 2016 in Northern Ireland.

Mortgage guarantee scheme

This one was only announced in the 2021 budget. Its aim is to support more people in the dream of home ownership. It would increase the availability of 95% loan-to-value mortgage products. A deposit can be really hard to save, especially when you’re paying rent. So this means buyers can look at purchasing with just a 5% deposit

Right to Buy and Right to Acquire

If you’re a council house or housing association tenant in England or Northern Ireland the scheme allows you to buy the property at discount. If you’re in England and don’t qualify for Right to Buy you may be able to get a discount on the property sale under the Right to Acquire scheme.

In Northern Ireland if you’ve been a tenant for five years or more you may be able to buy at a discount. The amount of discount you’ll get increases the longer you have lived in the property.

Your discount will be 20% if you’ve lived in the property for five or more years. You’ll get an extra 2% discount for every extra year. This is up to a maximum discount of 60% of the value or £24,000.

Have you used government schemes to help you get onto the property ladder?

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