There are hundreds of thousands of first-time buyers who are having to face the reality that purchasing a home can be more expensive than they initially expected. But what they’re forgetting is that they are not alone – and you have the chance to get a bit of help from deposit schemes such as those offered by the government or local Housing Associations.
For first-time buyers the property market can seem like an incredibly daunting place where everything is expensive, and changes occur frequently. There are several government schemes that are aimed at assisting first-time buyers get a foot on the property ladder, and have been put in place to ease some of the pressure that comes with buying a property. There are schemes like the Help to Buy Equity Loan that can help buyers who are only able to come up with 5% of their deposit, and the Lifetime ISA (Independent Savings Account) which offers a tax-free savings boost towards buying your new home.
With the help of these schemes first-time buyers are finding it much easier to buy their first new home and suddenly taking that big step up the ladder of the property market doesn’t seem so daunting. While these schemes are obviously there to make life easier, there are still a few things that buyers need to pay attention to – so that they know what they’re getting into, and what is required of them in terms of repayment of the loans. Let’s take a look at some of these schemes and how they could help you afford your new home.
Help to Buy Equity Loan
This scheme is aimed at boosting first-time buyers’ savings by the government paying out bonuses towards savings made by the buyer. For every £200 that is deposited into the savings, the government will add £50 up to a maximum bonus of £3,000 for £12,000 saved. This scheme, however, is not able to be put towards the deposit on your property and is instead a tax-free lump sum that is paid directly to the mortgage lender upon completion. You would have to put up the deposit on your own and then use the bonus to reduce the mortgage required on your property and the monthly payments.
There are other limitations with this scheme too – such as a price cap on the property and a limit to a single cash ISA payable per tax year. But you are able to use your HTB ISA savings alongside any other government schemes such as Shared Ownership or the HTB Equity Loan.
The Lifetime ISA is slightly different from the HTBISA in that it offers a tax-free boost up to £1,000 a year towards buying your first home. Buyers under the age of 40 can opt to open one of these accounts and deposit up to £4,000 each year, with the government paying out 25p for every £1 saved directly into the account on a monthly basis.
One of the major differences with this scheme is that you can opt to use your Lifetime ISA as a deposit on a property worth up to £450,000, and you can also choose to transfer your Help to Buy ISA balance directly into your Lifetime ISA without losing the tax-free benefits. While this scheme seems to be more flexible, it can also be more complicated – as the funds will be available as either cash or shares.
Shared Ownership doesn’t mean that you share your home with someone but rather that you co-own the property with a housing association. These schemes are not only aimed at first-time buyers, but also at specific properties. You can own from 25% to 75% of the property and pay rent on the part you don’t own. You can also purchase more of the property over time and this is where climbing the ladder becomes “staircasing”. In order to qualify for Shared Ownership, your household income must not exceed £80,000.
There is some security in these schemes as, unlike private renting, you won’t have a landlord who can decide to kick you out or sell the property from under you, and your rent is likely to be less than market value. There are also specific shared-home mortgages for these arrangements if you need to borrow money, though you can buy a home without a mortgage.
Right to Buy
Right to Buy is available to tenants who rent their home from their local council and makes it possible for them to buy their home at a discounted price. The amount discounted depends on where you live and the property you want to buy, so it can vary greatly. In order to be eligible for the Right to Buy (or Right to Acquire) scheme tenants must have been renting consecutively from the public sector, for example, a local housing association or council, for a minimum of 3 years (which was reduced from 5 years in May 2015).
The maximum discounts that are available from these schemes stand at about £82,800 in England and £110,500 in London.
Reserve to Buy
We are also throwing our hat into the ring and offering some assistance to make owning property more affordable and accessible to first-time buyers. We know, as property development professionals, that it can be a daunting task to make yourself a viable prospect for mainstream lenders in the property market – so here’s what we have come up with.
Strawberry Star is introducing the Reserve to Buy scheme that allows first-time buyers to purchase a new home for a small £500 reservation fee and only a 5% deposit. This offers buyers the opportunity to purchase an off-plan property worth up to £600,000 for just the reservation fee. Also, to offer added security and peace of mind, the price set on the day of the reservation will not change – even if the value of the property increases in the future.
Reserve to Buy is the solution for any first-time buyer who is looking to get on their way up the property ladder but can’t quite manage putting down a deposit on a property. If this scheme sounds like it could be the solution to your real estate needs, then please contact our offices to find out more.
This stamp duty exemption only applies to first-time buyers who are purchasing a property as their primary residence and in their individual capacity.
A note about stamp duty
These schemes are all here to help anyone who is eligible to get the leg-up they need to start building their real estate portfolio – but it is also possible to manage buying your first home with only a small deposit.
There are some mortgages available, that are not backed by the government, for deposits as low as 5 to 10%, and some may even offer a rate that better suits your personal preference or circumstances. Whether you opt into one of these schemes or not, it is always important to do as much research as possible and compare mortgages at different deposit levels.
The more you know the better, and the more capable you are of shopping smart for your first new home. Always remember that you can count on Strawberry Star to help you with any and all of your real estate or property management needs – from guiding you through the process of selling your home, to helping you search for available property and guiding you through the process of eventually becoming a first-time homeowner.