First time buyers – a helping hand to get a foot on the property ladder

First time buyers – a helping hand to get a foot on the property ladder

16:51 22 March in Blog, For Individuals, Residential Conveyancing

It is a common fact that millions of aspiring first time buyers are struggling to get a foot on the property ladder.  We are all aware that when purchasing a property a substantial deposit is required and whilst we are still obligated to continue paying rent and affording our lifestyles, this can be difficult to raise.

There are however various government schemes that are designed to assist first time buyers on to the property ladder, the most popular being;

  • Help to Buy Scheme
  • Right to Buy
  • Shared Ownership
  • New Buy Scheme to New Build Properties

For all of the above you still require a 5 % deposit.

Help to Buy, is referred to as an equity loan. Once you have produced the necessary 5%, the government will lend you a further 20% of the purchase price, which is an interest free loan for the first five years.  In the sixth year interest is charged at 1.75% and then will increase each year thereafter using the Retail Price Index plus 1%.  The balance of the purchase price is then made up with 75% mortgage finance.  The loan is repayable in full after 25 years or when you sell your house, whichever is the soonest.

A further method under the Help to Buy is the Mortgage Guarantee Scheme.  Again you must provide a 5% deposit and the government will guarantee the remaining 95% of the mortgage.

The New Buy Scheme to New Build Properties is similar to the Mortgage Guarantee Scheme although it only applies to new build properties

You must not rent out a property purchased under the Help to Buy Scheme and you cannot own a second home.

The Right to Buy Scheme applies to tenants who have lived in Local Authority Housing or Housing Association Housing for more than five years.  The relevant authority will offer a discount to the tenant dependant upon the area and size of the property.  The discount usually covers the deposit monies and most mortgage companies will offer a 100% mortgage to cover the balance.

Shared Ownership is another popular way to get a foot on the property ladder.  This scheme allows you to buy from the Local Authority or a Housing Association a share of the property value.  The share must be between 25% and 75% of the value of the property and the remaining share is rented back at a reduced rent.  You then have the option to purchase the remaining shares of up to 100% of the property value; this is referred to as staircasing.  This scheme only applies to leasehold properties and if the relevant authority still holds a share when you sell the property then they must have first refusal and can also find a buyer for the property.  If you own the property outright then in the first 21 years you must again give the authority first refusal of the property.

If you are thinking of trying to get on the property ladder these are the basic requirements of the scheme, which is out there to assist.  However as with all mortgages your home is at risk if you do not keep up the payments; therefore it is important that you consider all your outgoings when applying for mortgage finance.

If you require assistance in getting on to the property ladder or would like more information, please contact Julie Smith on 01756 700200 or [email protected]

Julie Smith

[email protected]