Help To Buy Options

Buying your first home can be really expensive, so here's some very quick thoughts on the assistant programmes offered by the UK Government for helping you buy a home.

Do I qualify for Help to Buy?

I've no idea... Go find out yourself you lazy fuck. You can go here to check out the eligibility requirements;
https://www.helptobuy.gov.uk/

But your main options are;
Help to Buy ISA
Help to Buy: Equity Loan
Help to Buy: Shared Ownership

HTB: ISA

This closes soon, so if you're reading this before November, you're in luck. After then? It's dead.

In it's simplest form this is a savings account that the Government will give you a top up if you promise to only use the money to go towards buying a property.

You'll get 25% of whatever you put into it up to a maximum of £3,000 contribution from the Government. There are restrictions of course - the Government isn't that generous!

So you can put a lump sum of £1200 to get you started, then you can save up to £200 a month in it. You can also only buy a place up to £250k (£450k in London).

But if you and a partner are saving for your first home, it's not a bad way to get some money off the Gov to help you out with the deposit.


HTB: Equity Loan

You buy the property, but you get a loan off the Gov for 20% of the value - interest free for 5 years. So you need to find 5% deposit and a 75% mortgage and you're away!

So it's a good way to get a boost of 20% in the house you can afford. But the downside comes later on. If the property doubles in value, you still owe the Gov 20%. Not whatever the £ equivalent was.

And you have to pay the loan off within 25 years, so after the first 5 years interest free it starts attracting an interest rate of 1.75% and it goes up each year. Which isn't a bad rate to be fair, but it's something to keep in mind.

You know where to go to find out more specifics, but this isn't a bad option for a lot of people. 5% deposit is much easier to save up than 25% (about 5 times easier...), and it gets you on the housing ladder.

I'd suggest you want to take the first 5 years saving up and increasing your earning potential so you can refinance and pay off the loan before the interest kicks in.

HTB: Shared Ownership

This is one I'm not a huge fan of. I get it, but I don't like it so much.

In this case you buy a percentage of a property, a housing association buys whatever you don't buy, and then you rent it off them for the foreseeable future.

It's like a Joint Venture with a housing association. Which is handy if you want a £400k house but can only afford £200k... you just buy 50% of the place, and you've got a much nicer house to live in than if you only spent £200k.

Makes sense right? But you still have to pay rent on the half you don't own. And if it goes up in value, you don't get the full benefit because someone else owns part of it.

And you can't sublet or rent out the place. And when you come to sell you have to offer it up to the Housing Association and other Shared Ownership tenants, so you've got a restricted market.

There are just a few too many cons for my liking. On the plus side you do get a much more expensive house. (That's the secret con, this is all just put in place to protect house builders and keep their sales prices where they are instead of being allowed to drop in a free market, but shhhhh nobody wants to talk about that).

Personally, I'd go the route I have done in the past and if I wanted to live somewhere I couldn't afford to live - I'd rent it. Then I'd use the money I could afford to spend on a house buying rental properties. That way I'm on the housing ladder, I'm benefiting from potential capital appreciation, but also hopefully from the cashflow of a rented property.

That then goes towards covering some of the cost of my own place.

You can read more about renting versus buying at my blog here

Conclusion

Do whatever you want. 

Having worked for Homes England who manage all of these programmes, I probably know more than most about them. 

If I had to go for one of them, I'd probably go for the HTB:ISA first, then the HTB: Equity Loan, then HTB: Shared Ownership. 

It's a personal preference, but that'd be my choice. 

If you need any help with the mortgage element of any of these schemes, I'd be happy to help. But may as well tell you now, I charge for my advice, so if you're being a cheapskate and trying to save everything for the deposit - there's no point wasting my time. 🙂 

Go forth and purchase, good people!