April 19, 2017

What Schemes are Available to First Time Buyers

It comes as no surprise that being a first time buyer in London is tough. More often than not you’re spending a lot on rent and trying to save for deposit whilst also seeing the rising house costs. It’s no secret that it’s not easy to buy for the first time.


If you’re struggling to find the right option for you, we’ve broken down the different schemes available for first time buyers below.

Help to Buy Equity Loan


The equity loan option requires a 5% from the buyer, the Government offer a 20% interest-free loan and the remaining 75% is to be covered by a standard mortgage.


There are some catches though; whilst there is no interest to pay for the first 5 years , in year 6, interest kicks in at 1.75%.


The rate increases every year thereafter at the RPI (retail prices index) measure of inflation plus 1%. The Help to Buy Equity loan is available on all new-build properties in England worth up to £600,000.


Help to Buy London


As of 1st February 2016, the London Help to Buy was launched as an extension of the Help to Buy Equity loan. The main difference being that the loan is worth up to 40% of the value of the home rather than 20% under the standard scheme.


Help to Buy ISA


This scheme was created to help add to first-time buyers’ savings pots. The Government will add £50 for every £200 saved in the account up to a maximum contribution of £3000.


However the Help to Buy ISA cannot be put towards the initial deposit and is there to reduce the overall mortgage amount on completion. Other limitations include a price cap of £250,000 on property the bonus can be used to buy, or if you’re in London that increases to £450,000.


It’s one Help to Buy ISA per person and you will be unable to pay into another ISA at the same time – but you can use these savings for another schemes, for example Shared Ownership.


Starter Homes scheme


This new scheme from the government means that 200,000 new build homes are available to first-time buyers under the age of 40 years old, but above the age of 23, with at least 20% off market value.


In London, the discounted homes should be priced no higher than £450,000 and outside of London no more than £250,000. Starter homes cannot be resold or rented at their open market value for at least 5 years after the initial sale.


Shared Ownership


It’s almost as simple as it sounds; Shared Ownership allows you to purchase a share of a home (between 25% and 75%) from a local Housing Association. You will then have to pay an affordable rent on the part you do not own.


As time goes on, you will be able to purchase chunks of the property as and when you can afford to until you own 100% of the home. They will be priced at the current market value – you will have to pay a valuers fee.


But how do you get it? You need to be earning no more than £90,000 for London, or £80,000 anywhere else, and the scheme is available on new-build and resale properties.


If you’ve got any queries regarding buying your first home, please don’t hesitate to contact us where one of our dedicated agents will be happy to help.


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