When it comes to how to get on the property ladder there are many avenues in which you can follow. With the introduction of various government schemes over the past few years, this has made buying a house a lot more accessible. In this guide Norwich Home Buyers will go through the various routes to help you purchase your first home.
Get Saving A Deposit
To kick this guide off let’s look at the route in which most us have been spoken to about by our parents, friends and even advisors. Saving a deposit is the most conventional route for wanting to buy a home. A deposit is put towards the overall house cost in order to help you obtain the amount you need via a mortgage. A lower requirement makes the mortgage more affordable.
Struggles occur when it comes to saving for a deposit. In some cases to get a mortgage you will need to save 20% or even more of the total value of the home. For example if you want to buy a home costing £2000,000 you will need around £40,000 or more. This is only the base amount, the more you can put down the cheaper your mortgage repayments will be.
Help To Buy
Help To Buy is the government scheme which was launched a few years ago. The government has given first time buyers access to an equity loan, a mortgage guarantee scheme and even an individual savings account (ISA).
The Equity Loan
The equity loan is one of the most commonly used parts of the government’s scheme. This is available to first time buyers or those looking to move up the property ladder to purchase new homes. In this case you will only need a 5% mortgage. So taking the case we spoke about previously for a £2000,000 home you would need a £10,000 deposit.
The government then tops up the deposit with a 40% equity loan. This therefore will give you an overall deposit of 45% towards that £200,000 home. The loan does come with an interest rate, and an interest free period for the first five years. During this period you will be charged 1.75% in interest year on year.
The current loan scheme is due to last until March 2021 and will then be replaced by a further loan which is due to run until March 2023. There is a regional cap which will dictate how much you can borrow as well.
The Mortgage Guarantee Scheme
The mortgage guarantee was aimed at buyers who only had a 5% deposit by enabling lenders to buy a guarantee on their loan. This part of the help to buy ended in 2016.
The Help To Buy ISA is a great way to increase the potential deposit you can utilise. How this works is very unique, and allows you to gain a 25% top up on your contributions you make up to the value of £3000. A saver was allowed to pay in £1,200 followed by £200 a month contributions. Plus the government contributions.
Help to buy ISAs closed in November 2019, however if you do still have one then you can utilise this and the payments up until December 2030.
Right To Buy
The right to buy schemes enable council tenants in England to buy their council homes at a discounted price. Right to buy gives you a discount on the market value of your home up to the whole value of £82,800. The actual discount in which you can be entitled does also depend on how long you have been at your property and also the property type.
This is a great scheme if you have been living in a council owned property. Many council tenants will have been in their homes for a while, and have made renovations to make the home exactly how they would like. Giving them extra incentive to purchase.
Shared ownership schemes allow you to buy a share of a property from a council or housing association. And then pay rent on the remaining part with a potential option to buy a bigger share later on.
How Does It work
You can buy an initial share in the property before 25% and 75% of the property value. In time you are then able to buy further shares in the property to eventually own 100%.
Who’s It For
You are able to qualify for shared ownership if your household income is less than £80,000 outside of London.
Build Your Own House
If buying that new build property is out of reach, then buying one which can be renovated could be an option. Or potentially buying a plot of land to build upon. There are associated costs with this, which does include gaining planning permission for anything you would like to do.
Building your own house can be exciting. However, make sure you have done a full cost breakdown. It can become very expensive when looking to build your own home, so make sure you have the funds in place to do this.
Borrow From Mum And Dad
If you are lucky and fortunate enough to have parents who are in a position to help you then it may be worth exploring these options. Some mortgages are designed as a guarantor mortgage which is specifically aimed at utilising your parents’ help. This also helps the lender to see increased security over the loan.
Make your parents aware however if they do have joint ownership they may be liable to pay capital tax gains or even stamp duty charges on their additional property.
As you can see there are many options when it comes to wanting and also getting on the property ladder. How to get on the property ladder is a lot easier than it once was, and choosing the right scheme for you is what is going to be best. If you would like some more information on the various schemes then please do feel free to contact us at Norwich Home Buyers.