Posted on 7.6.17
On a daily basis our conveyancing team receive calls from homebuyers confusing right to buy schemes with the various help to buy schemes and help to buy ISA’s.
Whilst the schemes are totally unrelated and it’s often a simple mix up of the terminology, I thought it would a good opportunity to clarify the differences between the schemes in one handy article, starting with Help to Buy…
Help to buy.
The Help to Buy Scheme is a government scheme first introduced in 2013. It is designed to help people get on the property ladder or buy a new home without saving up a large deposit.
As long as you have a deposit of at least 5%, are looking to purchase a house under £600,000 and are looking to live in the property as your main residence then you qualify for the Help to Buy scheme.
With this scheme, you will only need to provide a 5% deposit, the government then provides an equity loan up to 20% (40% in London) of the purchase price of your new home, giving you a 25% deposit and potential access to a wider range of more attractive mortgage rates with qualifying lenders.
An equity loan is available to both first time buyers and those moving home, however, it is restricted to new builds only.
The 20% equity loan the government provides is interest free for 5 years, in year six the loan will be charged at 1.75% and rising by 1% each year beyond that.
Those not financially ready to buy a home can apply for a Help to Buy ISA. A Help to Buy ISA is aimed at those who are still in the process of saving, they are a type of tax-free savings account ideal to give home buyers a helping hand on their way to home ownership.
For every £200 you contribute in savings, the government will top it up with an extra £50 (up to a maximum of £3,000). This is paid to your conveyancing solicitor when you are ready to exchange contracts on your new Property.
You can use the savings from your Help to Buy ISA to purchase a home worth up to £250,000, (or £450,000 if you’re buying in London).
To qualify for a Help to Buy ISA account you must be 16 or over, have a valid National Insurance number, be a UK resident, be a first time buyer and not own a property anywhere in the world. Also the property must be where the Client intends to live (not to be rented out or used as a holiday home) and the property must be purchased with a mortgage.
Right to Buy
A Right to Buy transaction allows most council tenants to buy their council home at a discount. If the property used to be owned by the council, but they sold it to another landlord (like a housing association) whilst the Client were living in it, then the Client may have the Right to Buy. This is called ‘Preserved Right to Buy’.
The Client can get a discount on the market value of the Property when they buy it. Currently, the maximum discount is you can get is 70% off the purchase price of your home. This is up to a total of £104,900 in London and £78,600 elsewhere in England. The size of the discount you will be eligible for will depend on the value of your home, the type of property it is and how long you have lived there.
The discount is based on:
- how long the Client has been a tenant with a public sector landlord
- the type of property they are buying – a flat or house
- the value of the Property
There are plans to extend the Right to Buy scheme to housing association tenants (as opposed to Council Properties that were sold to Housing Associations), although if this was to come into effect, it wouldn’t be until April 2018 at the very earliest.
Gorvins expert conveyancing team can provide you with more information about both Help to Buy and Right to Buy schemes and discuss all the legal implications with you.
So if you are interested in purchasing your council property or need legal advice regarding any stage of the process (whether purchasing, selling or following completion), call a member of the residential property team call us on 0161 930 5151 or email firstname.lastname@example.org
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