Is it your dream to own a property in the UK’s capital? In the past, people would typically rent for a few years whilst they saved for a house of their own. Unfortunately, today’s high renting costs make it difficult for people to save for a house. For many, renting has become a permanent arrangement instead of a temporary one. In the past 6 years alone, the price of renting in London has increased by 24% and on average, an annual salary of £51,200 is needed to be able to afford to rent a one-bedroom home. This is well above the average salary and an unattainable option for many. With some outside help however, it is possible to save for a house in London with a help to buy scheme. The Save to Buy scheme set up by the government is a good option for anyone hoping to buy their first property in the next few years.
London Help to Buy Scheme
Help to Buy London is a scheme set up by the government to give people hoping to get onto the London property ladder a helping hand. With the Help to Buy scheme, you will put down a deposit on a new build house of at least 5%. The government will then provide an equity loan of 40% towards the purchase price of any new-build property in London. Your mortgage makes up the rest of the value and most mortgage types are available under the help to buy scheme.
Saving up for a deposit with a Save to Buy ISA account can feel like a slow process. In your first month you can save up to £1,200 and then up to £200 each month after that, however the amount that the 40% you receive on top of this makes it worthwhile. If you buying a property with your partner, bear in mind that you can each open up a Save to Buy account to use towards buying a property.
One of the main benefits of a help to buy scheme is that you will only have to pay a 5% deposit instead of the usual 10% that mortgage lenders ask for. This makes paying the extortionate London deposit prices seem more feasible. The other main advantage is that you can borrow up to 40% of the purchase price of a house from the government interest-free.
The Requirements for London Help to Buy:
- The house must be a new build and have a purchase price of up to £600,000
- You must be at least 18 years of age
- You must be planning to live in the property after purchasing it(the property can’t be sub-let or rented out after you buy it)
- Your equity loan must be paid back after 25 years
- It must be the first property you will have owned