What is the help to buy scheme?
Are you asking yourself, what is the help to buy scheme? There are many different types but to put it simply, a help-to-buy scheme is a government loan. It’s the government lending you money which is interest free for, usually, 5 years. This contribution goes toward your deposit when purchasing your first property. Essentially, you can buy a house with very little money. Sounds wonderful, doesn’t it? Samuel disagrees.
Firstly, it’s not free money, it’s a loan which means you need to pay that back. Secondly, there are many strings attached which prevent you from using the property to earn revenue – you can’t rent it out, for example. Thirdly, you have to live there and the property must be a new-build and it must fit within a certain price bracket. The price range differs regionally. The biggest problem with new-builds is the fact that the value will drop as soon as you purchase it. So, now you find yourself residing in a house which you’ve borrowed a lot of money to own and is worth less – you’re probably in negative equity as the value of the house is less than the debt. Plus, you can’t rent it out so it’s a liability not an asset.
What could you do instead? Well, how about renting the place you choose to live and using whatever money you have to invest in properties to generate revenue? Samuel believes the system is set up so that you remain poor, it encourages saving and promotes bad debt. Rich people don’t think like that, they let money flow through them and invest to accrue more. It’s possible to say that the help-to-buy scheme is more of a help-to-sell scheme for property developers. Find out what Samuel means by that by forwarding to 8 mins on the video.