House prices in the UK have risen significantly over the past year. For first-time buyers, affording a home has become increasingly difficult. Fortunately, there are several government schemes available to help these buyers get on the property ladder. One of these schemes is the Help to Buy: Equity Loan, which offers buyers the opportunity to increase the size of their deposit on a new-build property.
New research has now revealed the best locations in England to buy a first home using the Help to Buy scheme.
How does the Help to Buy loan scheme work?
With the Help to Buy: Equity Loan scheme, the government provides you with a loan of up to 20% of the purchase price (40% if in London) for the purchase of a new-build home worth up to £600,000.
You have to provide a deposit of at least 5% and get a mortgage for the remaining amount. The equity loan is interest-free for the first five years.
One of the requirements of this scheme is that the property must be bought from a registered Help to Buy homebuilder.
Where are the best areas to buy using the Help to Buy scheme?
Property portal Movestreets has analysed estate agent listings across England to identify the locations that have the most homes available with Help to Buy.
The research shows that the best place to snag a home using the Help to Buy scheme is Suffolk. In this county, 3.6% of all the homes listed are eligible for the Help to Buy scheme.
Closely following Suffolk is Buckinghamshire, where 3.4% of all home listings qualify for the scheme. Cambridgeshire comes in third place, with 3.3% of homes eligible for the scheme. Norfolk (3.3%) and Bedfordshire (3.1%) round out the top five.
Other areas where buyers have a high chance of getting a home through the Help to Buy scheme are:
- Surrey (3%)
- Bristol (3%)
- Berkshire (3%)
- Northumberland (2.9%)
- Somerset (2.8%)
Overall, the research shows that the average proportion of properties for sale with Help to Buy in any given county in England is 1.8%.
Which areas are the worst?
According to the research, Merseyside has the lowest number of properties under the Help to Buy scheme at only 0.2%.
This is followed by West Yorkshire and Worcestershire, both at 0.4%, and then the Isle of Wight at 0.5%. Others are Cheshire (0.7%), Herefordshire and Cornwall (both at 0.8%).
What do you need to know before you apply for the Help to Buy scheme?
The Help to Buy scheme can help make your homeownership dream a reality, but it comes with risks.
One risk is that the amount you must repay may not be equal to the amount you borrow. It is based on the value of the property at the time of payment. If the value of your property goes up, so will the amount you have to repay.
In the current climate of rising house prices, homebuyers risk paying thousands of pounds more than they borrowed.
Furthermore, one of the Help to Buy scheme’s key criteria is that the loan can only be used for new-build properties. Although new-build properties have their advantages, including modern specifications and being more energy-efficient, they are usually priced at a premium compared to older houses.
The requirement for the property to be bought from a registered Help to Buy homebuilder can also add another premium to the price that you have to pay as a first-time buyer.
So, before you go down this route, carefully analyse your personal circumstances and finances to determine whether it’s the right option for you.
What other options are available?
Should you decide that Help to Buy is not a good option, the good news is that there are other government schemes available to help you get on the property ladder. These include the Mortgage Guarantee Scheme and the First Homes Scheme.
Meanwhile, if you are working hard to build a deposit, consider putting some of your savings into a Lifetime ISA for faster growth. You can save up to £4,000 each year in a Lifetime ISA and enjoy a 25% bonus from the government to use towards the purchase of your first home.
If you have a longer time frame for purchasing a home, it may be worthwhile looking into a stocks and shares ISA. While investing in stocks is inherently risky, it has the potential to provide higher returns than a traditional savings account.
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About the author
Sean is a personal finance writer with a strong passion for helping others become more financially literate and make better financial decisions. He covers everything from credit cards to savings to investing.
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