My boyfriend and I are hoping to buy a house in the not too distant future, and have begun making enquiries after many discussions about where and how we would do it.
We live in a flat on a new development that is still being completed. And when we saw houses available there that fit our criteria, we decided to visit the sales office.
Now, unless you’ve actually bought a property, much of what you read only truly makes sense when you’re going through the process. With all the Help to Buy schemes and mortgage offers out there, it can be hard to know where to turn.
Fortunately, my knowledge is pretty good and I’d done my research (what kind of MSE employee would I be otherwise?).
We were given a quote from a salesperson who made buying an expensive house (in what I believe is considered Greater London, though to me it’s Essex) sound very affordable using Help to Buy London. Brilliant, you may think.
While casually mentioning Help to Buy (as casually as you’d make a passing comment about the weather), the salesperson failed to mention any real detail about it. Like the key fact that whatever you borrow under the Help to Buy London scheme, you have to pay back. Or that it’s an equity loan, meaning that as the property’s value goes up, so does the amount you need to pay back.
Help to Buy London is one of a few Government schemes designed to help people get on the housing ladder, or move up the ladder (from a flat to a house for example).
The Government gives you a loan to boost your deposit to up to 40% (20% outside London with Help to Buy). This loan – separate to a mortgage – is interest-free for five years and charged at 1.75% from year six onwards (set to rise annually by the retail prices index inflation measure, plus 1%).
After that you repay it when you sell the property, based on the percentage you initially borrowed (ie, borrow the full 40% or 20% to boost your deposit and the Government takes the same back from the property when you sell it, which includes any growth in the price).
You can make a partial repayment too – this is called ‘staircasing’ – and the Government will only accept it if it’s for a minimum of 10% of the property’s current value, or you’re clearing the whole loan.
Plus there’s a £1/month management fee, repayable by direct debit from the moment you take out the loan.
Now, that’s a lot to consider but in my opinion, it’s all vital information. Buying a house isn’t a small decision and has a huge impact on future financial planning.
If the people selling them to you don’t know the information, it’s no wonder it can be a confusing process, as I’m sure many who have bought a house can attest to. Not to mention it feels like you’re haemorrhaging money at every turn.
And personally, Help to Buy isn’t something we wanted to do – we liked the idea of just owing money to one lender, not two, which is essentially what Help to Buy London means.
So while the schemes can be good, like anything, understanding how they work is crucial (we have a full guide on Help to Buy & Other Schemes for more).