The Pros and Cons Of The Help To Buy Scheme


Have you found yourself mulling over Help to Buy scheme pros and cons in a bid to buy your first Leicester home?

This year marks the fifth anniversary of the government’s Help to Buy scheme – an initiative which helps new homeowners get on to the property ladder by offering an equity loan of up to 20% of the value of a new build.

The loan is interest-free for five years and gives a real boost to anyone struggling to afford the deposit needed for a mortgage.

With a Help to Buy loan, buyers can purchase a new home with just a 5% deposit and 75% mortgage. The government then have a second charge on the property, in addition to the mortgage lender’s first charge.

As 2018 moves on, those who took a Help to Buy loan out when it began in 2013 will be starting to juggle the finances to get ready to pay the 1.75% loan fee which comes into play this year. The repayments will then increase each year by a further 1%, plus the rate of inflation.

At Readings Property Group, we regularly see first-time buyers get on to the property ladder. And Help to Buy has helped many people in Leicester to be able to have their first mortgage.

So, as homeowners start to feel the squeeze of the first lot of Help to Buy loan repayments, we thought we would take a look at the pros and cons of the Help to Buy scheme.

The good sides

When it comes to making the decision on whether to go for this kind of loan like with everything there are lots to consider carefully first. Here are some of the things you could benefit from when choosing a Help to Buy loan:

  • Reliable financial help when you can’t get a full deposit for a mortgage together.
  • It’s been created solely to benefit first-time buyers and get them on the property ladder.
  • No interest for the first five years – a bit of breathing space before loan repayments begin.
  • A chance to get on the property ladder sooner.
  • The loan can be paid back early (minimum of 10% of the property’s market value) for those looking to avoid equity payments.

The not so good sides

It’s not all plain sailing when it comes to a Help to Buy loan. It might seem a long way off, but eventually, there will come a time when you’ll need to pay interest, so financial planning for this will need to be factored in.

The government will also hold a 20% stake in your property until you pay off your equity loan – this means a share of any equity accrued.

There’s also the fact to consider that this loan is only available for new build houses which can often be more expensive and also, if you plan on remortgaging at any point, this may be tricky.

Buy with Readings

It’s certainly well worth weighing up the pros and cons of a Help to Buy loan before taking the plunge, but ultimately, if it works for you, the chance to get on the property ladder is certainly not worth missing out on.

For further details on buying or selling a house in Leicestershire and information and support for first-time buyers, contact our team of experts at Readings today.