With the Help to Buy scheme ending soon, first-time buyers will need to get their homes reserved by the deadline on the 31st of October.
Help to Buy has given 350,000 households the chance to buy their first home with a deposit of just 5%. The remaining amount is made up of a mortgage and also the Government giving an equity loan which can be up to 40% of the total value of the property. The Government have not announced whether they are planning to replace or extend the Help to Buy scheme, so it’s important that first-time buyers that want to get their foot on the property ladder act quickly.
That being said, there are other options available for first-time buyers who want to make that first step into the property market in a different way.
The Lifetime ISA
The Lifetime ISA is designed to help first-time buyers save up for their first home. The Government will give them an additional 25% of anything they save up to a maximum amount of £1,000 per year depending on the amount saved. The only disadvantage to the scheme is that if buyers withdraw funds for any reason other than buying their first home, then the government will charge them 25%.
First Homes Scheme
The First Homes Scheme offers homes at a discounted rate of 30%. In other areas, the discount can be as large as 50%. The scheme is available to those with a combined income of less than £90,000 who live in London and in other areas the limit is £80,000. The discounts will be fixed on the homes forever, so future buyers will also benefit.
The disadvantage of the scheme is that the properties can only be resold to other first-time buyers and therefore this could reduce demand and also limit the seller’s potential profit.
However, the advantages of the scheme are that first-time buyers could only need to pay £200,00 to £280,000 for a property which would typically be worth £400,000. This means that the size of the savings needed for their house deposits will be reduced and therefore their mortgage requirements will be reduced too.
Shared ownership is a great option for first-time buyers who don’t yet have a big enough deposit as they are only purchasing a percentage of a property (usually between 25-75%). This is advantageous as it means that first-time buyers will have smaller mortgage requirements and deposit requirements than they would if they were looking to buy a whole house. The remaining percentage of the house is owned by the local housing association with the resident paying rent on the share owned by the housing association. Over the years of the tenancy, it is possible to increase payments until 100% of the property is owned. Shared ownership is popular for first-time buyers who are wanting a great deal of flexibility.
This scheme is open until December 31st. Lenders taking part in the scheme are offering 95% loan-to-value mortgages with a guarantee from the Government. Under this scheme, first-time buyers will need a deposit of just 5% for mortgage products. The best way to check if you are eligible to buy a home under this scheme is to speak to an independent mortgage advisor.
Buy for anything up to £625,000
The new stamp duty changes will affect first-time buyers living in London’s spending capability the most. The lower threshold which was recently introduced in the mini-budget means that first-time buyers will now start to pay tax from £425,000 saving first-time buyers £6,250.
The price cap that properties qualify for a tax cut has been raised from £500,000 to £625,000, which could potentially save first-time buyers £11,250.
If you want to learn more about the alternatives available to you, speak to our conveyancing team today. Call 01473 229200 or receive an instant quote online.