Buying your first home should be exciting, yet the prospect of saving enough money for a deposit can often be daunting. To help fund a property purchase the government have introduced a number of schemes to assist first time buyers. Melissa Richards, a chartered legal executive at Spire solicitors, explains what's on offer.
Help to Buy ISA:
The Help to Buy ISA (Individual Savings Account) will give a big boost to those struggling to save a deposit. Under this scheme, you can put up to £200 into a designated account each month and the government will then top this sum up by 25 per cent. This means £50 for every £200 saved.
There is also the option of paying in an initial one-off lump sum of £1,000 to get the account started. If you manage to save £200 a month for five years – giving a total of £12,000 – you will get the maximum bonus from the government of £3,000.
Help to Buy Equity Loan:
The government launched the help to buy scheme to make it easier for people with small deposits to buy their first property and for existing homeowners to move house. Help to buy equity loans are only available for new-build properties. If you are able to put down a deposit of at least 5 per cent, the government will lend you up to 20 per cent of the rest of the value of the property, interest-free for five years. This means you can access more affordable 75 per cent mortgages.
The loan is not repayable until you sell the property and it is repayable at the same percentage of the sale price as of the purchase. For example, if the loan was 20 per cent of the purchase price, 20 per cent of the sale price would be due. After five years, you will be charged a fee of 1.75 per cent of the loan's value and this fee will then increase every year.
Stamp Duty Land Tax:
As buying a home is expensive, the government have assisted first time buyers with a stamp duty land tax (SDLT) relief. First time buyers purchasing their first home for £300,000 or less will pay no SDLT. Where the purchase price is over £300,000 but does not exceed £500,000 they will pay 5 per cent on the amount above £300,000.
Buying your first home is a huge commitment and you should never be afraid to ask your solicitor questions. They should give you clear guidance about how your purchase is progressing and provide you with clearly defined procedural steps so that you are kept well informed.
If you would like to discuss any points in this article further, please contact Spire Solicitors LLP on 01603 677077 for all your legal needs.
Spire solicitors have sponsored this column.
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