Government’s Help To Buy scheme is available to top-earners too

Government’s Help To Buy scheme is available to top-earners too

The government’s Help To Buy scheme has aided thousands of property purchases since it was launched in April 2013, but it’s not solely for struggling first-time buyers…

While Help To Buy has given 128,317 first-time buyers a helping hand onto the property ladder through equity loans, new data has emerged from the Office for National Statistics (ONS) revealing that as many as one in 10, or 15,737, Help To Buy homes has been sold to those with a household income exceeding £80,000. And surprisingly, a further 6,211 purchases were made by those earning more than £100,000 a year.

Although the average income of a household using the scheme is £44,068 according to the ONS, a remarkable number of people taking advantage of the offerings are higher earners, with 16% (24,791) properties being bought by those earning between £60,001 and £80,000.

How Help To Buy works

There are a number of schemes available under the government’s Help To Buy initiative, including an ISA for first-time buyers, a shared ownership option and equity loans for new-build purchases. The ONS data above focuses specifically on buyers who have received an equity loan to purchase a new-build home, which is not means tested and available to anyone buying a brand new property.

With an equity loan, the government will lend you up to 20% of the value of the property, meaning the buyer only needs a 5% deposit, with a mortgage covering the other 75%. The loan is free for the first five years after the purchase, and can be paid off on the sale of the property.

Is it worth it?

There are numerous benefits to investing in a new-build property, but they do tend to be more expensive than existing homes. According to Land Registry figures, the average price paid for a new-build in March was £302,522, while for existing properties it was £237,206.

While first-time buyers on average spent £201,635 on their new homes, the average paid by first-timers using Help To Buy was much higher, at £249,950.

Although some purchasers may not be able to get onto the ladder without the extra help from the government towards their purchase, there are a number of new 95% loan to value (LTV) products coming onto the market aimed at those with smaller deposits, and it could work out financially better for some to choose an existing property with a 95% mortgage as opposed to paying the extra price for a new-build with an equity loan. However, it is up to the individual buyer which option will work out better for them in the long run, and whether they would still rather opt for the perks that come with investing in a new-build.

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