Help to Buy: Pros and Cons: Are you thinking about purchasing a new home? Regardless of your situation, buying a property is a taxing process. First, you need to find the right home that will meet all your requirements. Nowadays, people usually use websites, such as korter.co.uk/, for their property search. Afterwards, you need to decide on your payment method. Fortunately, if you are a first-time buyer, you have more options, including schemes like Help to Buy.
What is Help to Buy?
Help to Buy is a government-backed scheme that provides first-time buyers with financial help to purchase a new build property. It lets homebuyers borrow an equity loan to cover from 5% to 20% (40% in London) of the property price. Then you need to pay a minimum deposit of 5% and get a mortgage that covers up to 75% of the price (55% in London).
However, you can only purchase a new build property, provided by a Help to Buy registered homebuilder. If you’re looking for a home in London, you can find Help to Buy properties here.
Pros:
- Help to Buy allows you to get full ownership of a home.
- You’ll only need to pay a 5% deposit.
- It helps you afford a mortgage that you might struggle with otherwise as you don’t need it to cover 95% of the price.
- Homebuyers don’t have to pay any interest during the first five years.
- The eligibility criteria don’t include a maximum household income cap.
- The equity loan term is usually 25 years.
Cons:
- The property you’d like to buy must be a new build.
- You must stay within the price limit that varies depending on the region (for instance, £600,000 in London).
- After the first five years, you’ll be charged an additional 1.75% interest, which will then increase every year, based on the Retail Price Index (RPI), plus 1%.
- Each repayment should be at least 10% of the market value of your property, which can change, meaning that it’s not a fixed sum.
- Not all lenders offer Help to Buy mortgages.
Help to Buy: Pros and Cons