Getting on the property ladder is tough. For buyers in London you are paying rent and saving for a deposit, and it can feel like an uphill struggle at times.
There are however certain schemes available to first time buyers, which we’ve outlined below:
Help to Buy ISA
This product is available from a range of banks, building societies and credit unions. You save money into a Help to Buy ISA and the government will boost your savings by 25%. So, for every £200 you save, you receive £50 in a government bonus. The maximum government bonus you can receive is £3000. The accounts are available to each first-time buyer and not each household. This means a couple could get £6000 towards their first home. Your solicitor will apply for the government bonus on your behalf and use the funds at the completion of the property transaction. You cannot use the funds for the deposit at exchange of contracts. Further details here.
If you cannot afford the mortgage on 100% of a home, you can buy a percentage of one (normally 25-75%) and rent the part you don’t own. As and when your income allows you can purchase more shares in the property (there are costs involved with this and you purchase at the current market value). To be eligible your household needs to earn £80000 or less outside of London and £90000 or less in London. Further details here.
Help to Buy Equity Loan
Under this scheme the buyer needs a 5% deposit, the government offers a 20% interest free loan (first five years only) and the remaining 75% is funded by a standard mortgage. Be aware though that from year 6 interest becomes payable on the 20% and starts at 1.75%. Every year after it increases by RPI (Retail Price Index) plus 1%. This scheme is available for all new-build properties in England worth up to £600,000. Further details here.
Help to Buy London
In an extension to the above scheme, the London Help to Buy was launched on 1st February 2016. Specifically to help buyers in London, the amount will grant an equity loan of up to 40% of the purchase price. Buyers can proceed with a deposit as little as 5%. Subject to qualifying you would need a mortgage on the remaining 55%. You won’t be charged any fees on the 40% for the first 5 years of owning your property. You cannot sublet this home and you are not allowed to own any other property at the time you buy your new home with Help to Buy London. From year 6 interest becomes payable on the equity loan and follows the formula in the Help to Buy Equity Loan scheme above. Further details here.
If you are a first-time buyer (under 40 years old) the Starter Homes scheme could help you buy a new-build home with a 20% discount. The maximum cost of a home offered via the Starter Homes scheme will be £250,000 outside London and £450,000 inside London. The scheme isn’t up and running yet but planning is well underway. Aspiring homeowners can register their interest online now here.