It’s hard to believe but true – the government is doing a few things to help people get on the property ladder.
Not everyone will qualify, but it’s worth taking a closer look at what’s on offer.
1. Help to Buy ISA
This government initiative applies to first time buyers.
- If you sign up for one of these special ISAs, the government tops up your savings by 25% up to a maximum of £3,000.
- You can save up to £200 per month. To kickstart your account, you can in the first month credit a lump sum of up to £1,200.
- For every £200 you save, you receive a £50 bonus from the government. Further, you don’t have to pay back any bonus you receive.
- The minimum government bonus is £400, which means you need to save £1,600 before you can benefit.
- To get the maximum bonus of £3,000, you need to save £12,000.
Your solicitor or conveyancer must apply for the bonus before completion of your purchase.
The rules of the scheme do not allow you to use the bonus as part of your deposit when you’re buying.
However the bonus does reduce your total contribution to the purchase price and is therefore an indirect contribution to your deposit.
The bonus is given to the individual not the property. That means if there are two people buying a property they could each be entitled to a £3,000 bonus – £6,000 in total.
50 Ways To Put Together A Deposit in 6 Months
2. Help to Buy equity loan
This government loan scheme applies to new homes with a price tag up to £600,000.
You may be able to use the scheme to buy with a 5% deposit instead of the usual 10%.
There are eligibility criteria for the scheme. Most notably, when you complete your purchase you must not own any other property.
You provide a minimum deposit of 5% and you pay charges on the government loan until you repay it. The loan can be up to 20% of the property (outside Greater London) or up to 40% (inside Greater London)
Example £200,000 property
YOU ARE NOT CHARGED LOAN FEES ON THE AMOUNT BORROWED FROM THE GOVERNMENT FOR THE FIRST 5 YEARS OF OWNERSHIP.
On a sale, you are entitled to a percentage of the increase in value based on your deposit and your mortgage contribution. In the above example that percentage is 80%: 5% deposit plus 75% mortgage.
FIRST TIME BUYER BASICS
Buying a property fast (wacky and wicked ways to raise a deposit)
Say no to being a tenant forever (how you can escape the tenant trap)
Property buyer newbie (explains the basic steps when buying)
3. Stamp duty relief for first time buyers
The relief was introduced in November 2017 and applies to first time buyers.
In the case of buyers paying £300,000 or less, they pay no stamp duty.
In the case of buyers paying £300,000 to £500,000, they pay stamp duty at 5% on the amount of the purchase price in excess of £300,000 – thereby gaining a reduction of £5,000 on the normal amount.
You cannot benefit from this relief if you have previously owned a residential property in the UK or anywhere else in the world.
Also, you must intend to occupy the property as your main residence.
First time buyers purchasing for more than £500,000 will not get any relief at all.
FIRST TIME BUYER BASICS
Is getting a mortgage easy? (exposes the secrets of getting a mortgage)
My first property (basic stuff first time buyers must know)
Raising a deposit (14 common ways to bag a deposit with ease)
There are other ways in which the government helps people to get on the property ladder. Keep an eye out for my next blog on this topic, to be published later this month.
Have you used any of these government incentives? Did they help you? Do you wish to share? Other readers may be able to learn from your story. Please leave your comments below.
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Rebel Property Coach
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Categories: 01 Finance