A lot of people will tell you that these days, it’s hard to get on the property ladder. Although the markets have changed, and the way young people or first-time buyers approach this market has too, we see it as a fresh challenge, and not one that’s necessarily a lot more difficult.
It’s certainly true that the cost of a new home has risen sharply since 2002 and that a new home is often near eight times the average wage (up from around just five times in 2002).
But there are new schemes and plans in place to help first-time buyers and young people looking to get onto the property ladder, so don’t give up on that dream just yet.
The Help to Buy Scheme which includes the Help to Buy: ISA, Help to Buy: Shared Ownership and Help to Buy: Equity Loan option is there to help hard-working individuals get their first home despite the increasing prices and stagnant wages.
All three options offer a route to those first home front door keys and a run on the ladder of property. Let’s take a look at the options, so you can see whether one of them might be the best route to a new home for you.
Help to Buy ISA
Saving for your first home? There’s some Government cash you can get hold of to boost your savings. One of the most common ways to save money is through as ISA thanks to the tax savings and often higher interest rate offered.
Most first-time buyers will be saving away for their deposit before they apply for a mortgage and an ISA is a good place to do that. The Help to Buy ISA scheme will top that up for you with an extra £50 for every £200 you save.
Here’s the maths:
- Save up to £200 a month to get your £50 bonus
- Save for five years (£12,000)
- Get a bonus of up to £3000 in your ISA
You can add up to £1,200 into you ISA right away and still qualify.
Find out more on the Help to Buy ISA page here.
This option is aimed at those who can’t afford a mortgage on 100% of the property they’re looking to buy. This scheme will help you with that by offering to take shared ownership of the mortgage with you, and charge you rent on the remainder.
Shared ownership will cover 25-75% of a mortgage and then calculate the rent for the remainder, effectively making you a shared owner AND a tenant in your new home. The partnership suits both sides and the rent is designed to be affordable to help you get on the ladder.
If your income improves then you can buy back (increase your mortgage) on the remaining shares in the property.
It’s a really interesting idea and is open to anyone with a household earning less than £80,000 a year (£90,000 in London).
Find out more about Help to Buy Shared Ownership here.
Help to Buy Equity Loan
Another option is the Equity Loan. With this scheme (for new homes only) the Government will lend you up to 20% of the cost of your newly-built home. You’ll then only need a 5% deposit and a 75% mortgage to complete the cost of the home.
Here’s the maths on a £200,000 home:
- 5% buyers deposit – £10,000.
- 20% Government Equity Loan – £40,000.
- 75% mortgage – £150,000.
If you sell your home in the future then bear in mind that the Equity Loan will also increase in value, just like the rest of the equity in your home.
This 20% loan towards the cost of your new home is interest free for 5 years and it means you’re only looking to save for a 5% deposit to get on the ladder.
Find out more about the Help to Buy Equity Loan here.
There’s (nearly) always a way…
We find that although there are many common situations when it comes to buying a home and applying for a mortgage, everyone is different and that means that their circumstances can be, too.
The way to get the best mortgage for you or to be accepted for a mortgage is to tailor the product you’re looking at, to you. There are lots of options and the above three schemes, although great, are just three of them.
That’s where an advisor like us comes in. On the surface it can seem overwhelming and many simply ask their bank for a mortgage and accept their answer as the final answer for them.
Why not speak to us as well, or instead? We can help by looking at your unique circumstances, what you can afford, what you qualify for, and what you can do.
Get on the ladder isn’t ‘easy’ but it’s certainly not as hard as some like to make out – if you take good advice and plan carefully.
Your home may be repossessed if you do not keep up payments on your Mortgage. Fees may be payable at a later stage.