Helping to make Help to Buy helpful
Help! The government has its heart in the right place, trying to ‘help’ first time buyers with its Help to Buy schemes… and as of today a new one has launched, the Help to Buy ISA. It can all feel very confusing – we’re not promising to ‘deconfuse’ things completely, but here is a brief summary of how Help to Buy works with Pocket, and links to some nice clear explanations.
Help to Buy ISA – if you’re starting to save to buy your first home
The Help to Buy ISA is a new savings scheme that the government has introduced to help first time buyers save for their deposit – it’s tax-efficient, and the government will also boost your savings by 25%. This one’s a no-brainer if you’re planning to buy in the next few years. Basically, you can save up to £200 a month towards your first home into a Help to Buy ISA and the government will boost your savings by 25% – as long as you use the ISA to buy your first home, you don’t need to repay this. So for every £200 you save, you get a bonus of £50 – if you save £12,000, the government bonus will boost your total savings by £3,000 to £15,000. This is the maximum that the government will contribute, but you can still use the ISA to keep saving beyond £12,000 (which would be topped up to £15,000). The Help to Buy ISA isn’t going to help you if you want to buy a Pocket home NOW, but it will definitely be useful if you’re just starting to think about buying, and will work with all our future schemes.
See more at: Daily Mail – Help to Buy ISA
Help to Buy 1 and 2 – if you’re ready to buy your first home
The other Help to Buy schemes are all about making it possible to buy a home with a really low deposit. There are two types of Help to Buy – an equity loan and a mortgage guarantee scheme. Both are available to first time buyers, and only require the buyer to put down 5% of the property value, so you need less saved up to be able to get your foot on the property ladder. At Pocket, we currently only sell our homes with the Help to Buy equity loan.
Help to Buy 1 (equity loan)
The government’s Help to Buy equity loan essentially means that you only need to have 5% of the Pocket purchase price as a cash deposit; the government loans you the rest of your deposit (20% of the Pocket purchase price) on a 5 year interest-free term, and you can raise the remaining 75% as a mortgage. (It gets a bit confusing because Pocket comes with a 20% discount to the open market price, but the price we advertise has already been discounted, so you can work with that as your sale price). The equity loan is interest-free for 5 years, after which it can be repaid or you will have to start paying interest. All Pocket schemes have a number of flats allocated to this Help to Buy scheme, linked to certain lenders, and we usually release them first. Read all about the Help to Buy equity loan on the government website; and contact our recommended mortgage adviser Censeo who will be able to help you with any specific questions. Look out for our early releases of homes that are eligible for Help to Buy by registering on our website.
Help to Buy 2 (mortgage guarantee)
The government’s Help to Buy mortgage guarantee is similar to the equity loan – but different! With this scheme you can borrow more from your mortgage company, because the government acts as a guarantor. So all your borrowing comes from the mortgage company, which needs to be participating in the scheme, and you pay it off as you go along. We’re still working on being able to offer the Help to Buy mortgage guarantee on our Pocket homes, we’ll keep you posted (as long as you’re registered (link)). There’s more information on the government’s website:
Clear as mud? Well, we tried!