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This article was published on August 4th, 2023
Whether you’re looking to buy a new home now or in the future, it’s very likely that you will come across the terms ‘right to buy’ and ‘help to buy’.
What most people don’t realise is that although the terminology sounds very similar, both schemes are in fact totally unrelated.
To help clear up the issue and save you time when you are looking for potential funding to help you buy a home, we’ve put together a guide to define the differences between both schemes, starting with ‘right to buy’
A ‘right to buy’ transaction allows you to purchase your own council house if you are currently a council tenant. The scheme allows council tenants to purchase their home at a discounted rate. Tenants who live in a former council house that was sold to a private landlord may also have the ‘right to buy’ as they were living in the house before it was sold, this process is called ‘preserved right to buy’.
If eligible for the ‘right to buy’ scheme the tenant can receive a discount of up to 70% off the market value of the property at the time of purchase. The maximum value of any discount is up to £127,900 in London and up to £96,000 elsewhere in England.
In order to determine the size of the discount that a tenant is eligible for, three key factors are taken into consideration.
The discount is based on how long a person has been a tenant with a public sector landlord, what type of property they are buying, for example, a flat or house, and finally the market value of the property.
The ‘help to buy‘ scheme was first introduced by the Government in 2013. Its purpose was to allow people an easier route onto the property ladder without having to save such a large deposit.
Unfortunately, the scheme closed on March 31st, 2023, and is reported to have closed due to it artificially inflating house prices. The ‘help to buy’ scheme required a deposit of at least 5% and the house you wanted to purchase must cost less than £600,000. The house must also have been your main property, you could not buy the house and then rent it out.
Once you had your 5% deposit, the Government would give you an equity loan up to 20% of the cost of your new home, meaning you would have a much healthier 25% deposit for a new home.
This made it easier to access a wider range of mortgage options from qualifying lenders, with the possibility of lower mortgage repayments for you in the future. The 20% equity loan was available to both new buyers and those moving home, but there was a catch. Buyers were restricted to new build properties only.
For those who weren’t quite ready to take the step onto the property ladder, but were considering it for the future, you may have opted for a ‘help to buy ISA’, a type of tax-free savings account which is designed to help future home buyers save a deposit quicker. If you already hold a ‘help to buy ISA’, you can still pay in up to £200 a month until November 2029, and when you buy your first home, the Government will top up your savings by 25% (up to £3,000). You have until November 2030 to claim the bonus.
There will not be a new scheme introduced to replace ‘help to buy’, but luckily there are lots of alternatives available, as detailed by HomeOwners Alliance. Government support will be available in a number of formats, such as:
A ‘lifetime ISA’ is also available to help you purchase your first home, allowing you to deposit up to £4,000 a year until you’re 50. The Government will then add a 25% bonus to your savings, up to £1000 per year.
The savings can be used to help you buy your first home, provided:
If you are considering purchasing a property and would like more information about either the ‘right to buy’ schemes, or ‘help to buy’ alternatives, or have questions about conveyancing then contact our team today..
Thorneycroft conveyancing solicitors provide comprehensive, cost-effective conveyancing services in Macclesfield, Buxton and Holmes Chapel. Our conveyancing process is designed to safeguard your interests at every stage of the transaction, whether you are buying, selling or re-mortgaging your property.
Our specialist property conveyancers offer a fast, friendly and efficient service and you will have a dedicated person dealing with your transaction from start to finish. In order to ensure that all processes run as smoothly as possible, our conveyancing team will keep in regular contact with you at each stage of the transaction.
Thorneycroft Solicitors has been granted Conveyancing Quality Scheme (CQS) accreditation by the Law Society. The CQS provides a nationally recognised quality standard for residential conveyancing solicitors, ensuring that you as clients can be assured that you will receive a quality service from fully qualified and experienced solicitors.
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