Residential Property specialist Olivia Sweet looks at what help is available for first time buyers.
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Help for First Time Buyers
The Help to Buy: Equity Loan scheme finally ended on 31 March 2023. So, what other schemes are available to help you take that first step onto the property ladder?
Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme was born of a need to address the withdrawal of many low-deposit mortgage products in the early months of the pandemic. As a result, many first-time buyers could not secure a mortgage as the housing market soared following the announcement of the Stamp Duty holiday.
Subject to qualifying criteria, the government offers a partial guarantee – generally 15% – to compensate the lender if the borrower defaults. However, the scheme will end on 31 December 2023.
First Homes Scheme
This First Homes Scheme is available in England to help people buy a new build home at a significant discount. Typically, the discount is between 30% and 50% of the market value. First time buyers in specific categories, such as those on low incomes and key workers, receive priority access to the scheme.
The property must be:
- a new home built by a developer; or
- one bought from someone who originally purchased it under the scheme.
To be eligible, you must be:
- at least 18; and
- a first-time buyer; and
- able to obtain a mortgage for at least half the purchase price; and
- buying the property as part of a household with a total income not exceeding £80,000 (or £90,000 if you live in London).
In addition, the local authority may set some additional eligibility criteria. For example, some authorities offer priority to:
- those already living in the area;
- essential workers;
- people on lower incomes.
However, there are exemptions from certain local authority conditions for current and some former members of the armed forces and their families.
Shared ownership is a combination of buying and renting. As the homebuyer, you:
- buy a share in the property between 10% and 75% of the full market value.
- pay rent on the portion you don’t own to the housing association or local authority that owns the balance.
Over time, you can increase your stake in the property up to 100% through the process of ‘staircasing’.
Sometimes, you can buy a share of a home you already rent through a different process called Right to Shared Ownership.
Right to Buy
The Right to Buy scheme allows many council tenants to buy their home at a discount. Check your eligibility for Right to Buy.
In brief, the scheme applies if:
- the property is your only or main home; and
- it’s self-contained; and
- you are a secure tenant; and
- you have had a public sector landlord for at least 3 years, although it does not have to be 3 consecutive years.
If you are a first time buyer with a limited deposit, but have family support, you might consider a guarantor mortgage. A mortgage guarantor – often one or both parents – guarantees to cover your mortgage repayments if you default.
If eligible, lenders require guarantors to obtain independent legal advice, confirmed in writing before completion.