For the first time home buyer, purchasing a home can be both an exciting and daunting prospect. With the appeal of owning a home comes the process of looking into mortgages for the first-time buyer.
It is likely that the first-time buyer has less experience or knowledge of the mortgage market than some along with a requirement for assistance with first time buyer deposits. For some, the ‘bank of mum and dad’ can lend the required finances for their children to get onto the property ladder but if that option is not available, then an understanding of first-time buyer schemes and options is crucial.
In this article, we look at three of the options that first-time buyers of new build homes might wish to consider.
HELP TO BUY: EQUITY LOAN
OUTLINE
This scheme launched in April 2021 and is running until March 2023 and the amount that you borrow is based on the current market value of your chosen property when you buy it. For the first 5 years, you do not pay any interest on your equity loan. You start to pay interest on your amount borrowed from year 6.
Outside of London, you can borrow from 5 to 20% of the purchase price of a new build home from the government. This increases to up to 40% in London.
BENEFITS
So, this means that you can put down just a 5% deposit on the property price and the government will lend 5-20% (or 40% in London) to add to this. This decreases the amount borrowed.
POINTS TO CONSIDER
The amount that you pay back covers just the interest of the loan and so payments will be fixed each month. Whilst you know exactly how much you will be paying back each month; you will need to plan for paying back your equity loan too.
It is worth noting that the government website says: “if you get an equity loan between January and March, you pay slightly less interest than equity loans taken later on in the year”.
ELIGIBILITY
· To apply for this scheme, you must be 18 years or age or older and a first-time buyer.
· The home in question must be a new build property.
· The builder of the home will need to be registered with this scheme too.
· Regional price limits also apply.
For more information on this scheme visit https://www.ownyourhome.gov.uk/scheme/help-to-buy-2021-2023/
HELP TO BUY: SHARED OWNERSHIP SCHEME
OUTLINE
This scheme has been running for several years and the government will be funding a new model for shared ownership with accessibility from 2022. The existing scheme will also still be in effect from now until 2023. For those who cannot afford to buy all of a chosen property, the shared ownership scheme allows the buyer to purchase a percentage of their property (from 10% to 75%) and pay rent on the remaining percentage.
BENEFITS
Shared ownership allows buyers to get onto the property ladder without needing to afford a mortgage for the whole property. This allows those on lower incomes to start buying a property. Once the buyer has been paying their mortgage for a set period, the homeowner can then ‘staircase’ to buy the remainder of the property in 10% increments (or 1% on the new scheme with reduced fees) as required.
The new scheme also offers more benefits to the homeowner on the tenancy side by giving landlords more responsibility with the upkeep of the property for the first 10 years.
POINTS TO CONSIDER
With shared ownership you will not own all the property and so must pay rent (and possible a service charge) on the remainder of the property or staircase accordingly.
The new Shared Ownership scheme will give more control to the shared owner over their landlord if they wish to sell their property.
The shared ownership scheme is not exclusive to first time buyers. It is therefore worth noting that local councils may prioritise certain groups of people over others depending on availability of houses and housing needs.
ELIGIBILITY
· Whilst this scheme is available to first time buyers, it is also available to those selling shared ownership or fully owned properties too.
· Your household will need to earn no more than £80,000 per year (£90,000 in London).
For more information on this scheme visit https://www.ownyourhome.gov.uk/scheme/shared-ownership/
FIRST HOMES
OUTLINE
First Homes is a new scheme that is designed to help both key workers and first-time buyers to purchase a property at a discounted rate, enabling more people to get onto the property ladder. The first homes in the scheme became available in the East Midlands on 4th June 2021 with further properties planned across England over the coming months with a plan to introduce 10,000 homes per year if demand is there.
BENEFITS
First Homes will allow buyers to purchase properties with between 30-50% of the market value being discounted at the time of purchase. This discount is permanent and available to those seeking full ownership of their property.
POINTS TO CONSIDER
This scheme is only available in England and houses will be built in areas where demand applies. First Homes will only be offered on a limited number of plots on new developments. You will need to confirm with the home builder if this scheme is being used on their development.
ELIGIBILITY
· To be eligible for First Homes, you must be a first-time buyer and your household income must not exceed £80,000 (£90,000 for London).
· Post discount property price limits do apply (£250,000 in England and £420,000 in London). Local Authority discretion is allowed with this limit.
· This should be the buyers only home and at least 50% of the property must be purchased through a mortgage or home purchase plan.
· The local authority decides who is classified as key worker.
For more information on this scheme visit https://www.ownyourhome.gov.uk/scheme/first-homes/
If you are considering your options for a first-time buyer mortgage and would like to find out how we can help you, please contact us on 01234 604501 or email harjinder@bibimortgages.co.uk
