Whether you’re living with parents, or sharing with flatmates, becoming a homeowner and finally having a space to call your own is probably something you’re aiming for.
The problem is UK property prices are high and continue to rise. The deposit and other costs a first-time buyer must pay to buy a house – stamp duty and surveyor fees, for instance – can also make getting on that first rung of the property ladder quite difficult.
So what options are available to a first-time buyer to give them that extra leg-up onto the property ladder?
Help to Buy scheme
With rising house prices, it has become increasingly difficult for a first-time buyer to afford a deposit on a property. Help to Buy is a government scheme designed to help them out.
One way in which the scheme helps first-time buyers is the option of saving less for a deposit – in fact you could move home with a deposit as low as 5%.
The government scheme allows first-time buyers to just save 5% of a property’s value, with the government providing an equity loan for up to an additional 20%.
The buyer then needs to secure a mortgage for the remaining 75%. Interest on the government loan becomes a factor after five years and will influence the amount you have to repay. It’s worth considering this option carefully as the added interest on top of the amount you need to repay could affect your financial situation.
There are a number of conditions around the reduced deposits; the amount you repay on the government loan when you sell the property depends on the market value at the time, which means you could repay more than you borrowed.
A cap is also in place on the value of property you can borrow against – up to £600,000, the property also needs to be newly built. The FAQs on the Help to Buy website will explain this in more detail.
Help to Buy ISAs
Another option is for you to get help from the Help to Buy: ISA. The savings account allows a first-time buyer to save for a deposit coupled with an additional ‘top-up’ from the government, totalling £3,000.
This cash boost depends on the amount saved and is equal to 25% of the money that buyers have saved in the ISA – the government adding 25% to savings of up to a maximum of £3,000 on savings of 12,000.
Essentially, the government give £50 for every £200 saved up over a five-year period. You can claim the government bonus once savings have reached a minimum of £1,600.
The bonus also applies to each first-time buyer, rather than being applicable to a single property. This means a couple can receive up to £6,000 for their joint purchase. To learn more about the details of the Help to Buy: ISA, visit the HM Government’s Help to Buy web page, how does it work.
Aside from ways to help you save for a deposit there are also shared ownership and rent to buy schemes available. These allow you to buy a stake in a property and gradually buy a larger stake over time or rent the property you intend to buy at a lower rate for five years, before making the decision to buy the property or move out. As with the different savings options there are different conditions that effect how you would sell the property and different conditions for being eligible for the schemes.
First-time buyers can face an uphill struggle in saving the amount needed for a deposit, but schemes like these can make the process that bit easier – helping potential buyers get onto that first rung of the property ladder sooner rather than later.
Once you’ve got that foot on the property ladder our blog post, ‘The Right Way To Move House‘ can give you the tips you need to make moving a more straightforward and painless experience.
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