Buying your first ever home is incredibly exciting but at the same time, also rather daunting. You’ve never done this sort of thing before and, let’s face it, it’s huge.
For most people their home is the most expensive item they’ll ever buy in their life. So it’s no wonder that as a first time buyer you feel nervous about entering the property market.
Still, this quick run-down of the government schemes available today for first time buyers should definitely help with the financial side:
Help to Buy: Equity loan
The Help to Buy Equity Loan Scheme is regarded as the government’s flagship property project. There is even a special version for the London market (where the government pays 20 per cent of cost of your home in the form of an interest-free loan for up to five years; it’s 40 per cent in London due to the higher house prices).
The advantages of this scheme – which is due to end in 2021and applies to homes valued at less than £600,000 – is that first time buyers don’t need to save for a huge deposit and there is time to save in order to pay it back. The disadvantage is that interest will be charged after the five years.
Help to Buy: ISA
Take out a Help to Buy ISA, save £200 a month and the government will chip in another £50 a month (ie 25 per cent of any savings you make every month). The most you can gain in government interest is £3000 – which is tax-free and you don’t have to pay it back. It must, however, be used to pay for the purchase of your new home.
The advantages of this scheme is that – unlike Help to Buy – you don’t have to choose a new build property, and there is no limit on its value. If you’re moving in with a partner then they can also claim the £3000, meaning you’d have a joint £6000 to put towards your new home.
The disadvantage is that you have to have saved at least £1600 before you start earning bonus interest. If you’re keen then you’d better be quick as the scheme is due to end in 2019.
This government scheme is starting to get plenty of publicity thanks to the fact developers are at last getting available homes up-and-running. The ‘shared’ aspect isn’t to do with getting in a flatmate but rather the fact you are part-buying and part-renting the property.
The advantage of this government property market scheme – which is available for joint households or individuals earning less than £90,000 a year – is that you can take out a mortgage for as little as 25 per cent of the value of the property (up to 75 per cent) and pay a subsidised rent on the rest. The idea is that as you manage to save you ‘staircase’ ie buy more of the property, until eventually you have a 100 per cent mortgage.
The disadvantage is that ‘staircasing’ involves getting a survey done and legal fees so can prove expensive every time you want to ‘buy’ another 10 per cent of the property. It can still prove pretty difficult to get a mortgage in the first place.
Stamp duty abolished on first time buyer properties
Meanwhile, no potential first time buyer can fail to have noted Chancellor Philip Hammond’s announcement in the November budget that he was cutting stamp duty on homes valued at £300,000 or less, especially for them. What that covers is around 5.3 per cent of homes in the Greater London area and should save buyers up to £5,000.
As the above schemes show, the government definitely wants first time buyers back on the property ladder. Are they really doing enough though? See more property market analysis and comment at our website The Bléu Plan today.