Current economic conditions have made it more difficult for first-homebuyers to buy property thanks to a number of factors such as inflation, rising cost-of-living, property market speculation, housing supply and demand, etc. These days when everything seems so expensive, it has become much harder to save for a deposit compared to two to three decades ago.
However, not everything is all doom and gloom. If you are a first-homebuyer, there are some programmes that can help you purchase your home. These include the ff:
Help to Buy: Equity Loans
Who is qualified for an equity loan?
Both first-time home buyers and movers may apply for an equity loan under the Help to Buy scheme, as long as the house you want to buy has a purchase price of up to £600,000.
The division of payment in equity loans is pretty simple to understand. Applicants must contribute a minimum of 5 per cent of the price as deposit. The government, on the other hand, will give you a loan amounting to 20 per cent of the price. The rest or 75 per cent of the amount, you’ll have to cover with a first-time buyer mortgage.
So suppose you want to buy a house for sale at £200,000: you, the buyer, would have to shell out £10,000 as downpayment; the government gives you an equity loan of £40,000; and the remaining £150,000 will be covered by a mortgage.
Never forget that houses under an equity loan can’t be sublet to another person or family, and it’s important that the house is the principal residence of the applicant, otherwise you risk losing the government grant.
Help to Buy: Mortgage Guarantees
This scheme is pretty popular because it has helped many first time buyers purchase a house with only 5 per cent deposit. However, there’s a lot confusion on how this scheme acutally works.
To help make things clear, mortgage guarantees are applied for by you, the buyer. But the guarantee from government is given to your chosen lender. That’s why you can apply for this grant directly with partcipating banks around the UK.
Buyers who want to qualify for this scheme must prove that the house they are buying are:
- priced at £600,000 or less
- not purchased through shared ownership or an equity loan
- not a second home
- not intended to be an after purchase.
Shared Ownership Schemes
Shared ownership schemes, unlike the others, are applied through the local housing associations; that is why only a first-time buyer with a household income of £60,000 or less and currently renting a council owned property can qualify under this scheme.
With this grant, homebuyers can initially buy 25 to 75 per cent of a house, then pay rent for the rest of the remaining share, but this setup isn’t permanent. You can buy more shares of the house, once you’ve become a co-owner, under what they call the “staircasing” process.
The price of the new shares you’re going to purchase, however, depends on the house’s value when you want to buy additional shares. If your house’s value goes up, then you’ll pay more. But if the value goes down, then you’re going to pay less!
Help to Buy: NewBuy
The NewBuy scheme helps UK residents or people given permits to stay for an extended period in the country buy newly built homes with just a 5 per cent deposit.
Not all newly built homes are covered by this scheme, unfortunately. Only newly built homes which meet the following characteristics are covered:
- property being sold for the first time, or for the first time in its current form
- priced at £500,000 or less
- used as main residence
- fully owned by the buyer
- built by a contractor participating in the scheme