05 May, 2023

First-time buyer schemes you should look for

With the economic meltdown, rental struggles, daily expenses, constantly rising prices and other factors, it can be harder to upgrade your assets.
Getting there on the property ladder can especially be very challenging. Thankfully the UK government stepped in to make it comparatively easier for first-time buyers to acquire a property of their own. The government is now offering various first-time buyer schemes. However, it can be difficult for someone fairly new to the real estate world to understand and choose a scheme for themselves.

People who decide on buying homes for the first time have to consider many factors, such as the initial deposit value, the locality they want to buy the homes in, the mortgage and their income etc. Here are some schemes to facilitate the first-time buyers

Help to buy: Mortgage guarantee scheme

The most substantial aspect of this scheme is that you only have to deposit 5% of the property's value initially for acquiring a mortgage. The low deposit money renders it easy for the buyers to make the buying move.

The lender gets a government guarantee of getting its loan money back. Hereby, it won’t be wrong to say that the government guarantees the lender on your behalf to pay back the money in case you fall short of paying it within the predefined time.

What to look out for?

There must be some cons when there’s a pro to something. Once you own the property, you’re bound to live in it. Additionally, This scheme only applies to properties within the price bracket of £600,000. The mortgage money has to be repaid, which means this scheme is applicable when you acquire a repayment mortgage, not the interest-only one.

This scheme has a limited number of lenders, which surges the interest rates. Since the mortgage money isn’t huge considering this specific scheme, many lenders save themselves by imposing a higher interest rate.

The brighter side

Lower deposit rates are the silver lining for the buyers, which boosts their confidence to step up the property ladder. This mortgage scheme isn’t limited to first-time buyers; home movers can also avail of it across the UK.

First home scheme

If you cannot afford a home in your locality, the first home scheme is for you. This scheme offers you a ‘new-build’ home at a discounted price. First-time buyers can enjoy a 30% discount on the market price. This scheme makes it very easy to achieve your property milestone. The new-build houses are otherwise full-price properties, but they are only available at discounted prices for first-time buyers.

In some localities, the authorities have the edge of increasing the discount up to 50% due to excessive price hikes. When reselling this property, the scheme is re-applied for the next owners after the home has been individually valued.

What to look out for?

While buying a property as a couple, neither of the partners should have a previously owned property. Both of them should be first-time buyers in order to benefit from the scheme. Once acquired, you must make it your permanent residence; it can not be bought for buy-to-let or other purposes.

You are only eligible for this scheme if your collective income is £80,000 while living in England and £90,000 in the case of London.

The brighter side

This scheme is open to people from any profession. However, key workers like nurses, firefighters, veterans from the armed forces, serving officers, police and teachers are prioritised to benefit from this scheme.

Although this scheme requires the buyers to get a mortgage which covers at least half of the value of the property, because of the discount, the overall price is naturally lower. Additionally, you do not have to pay back the discount even if the house's market value rises.

Lifetime Individual Savings Account

You can use your LISA account to buy your first home for a home costing £450,000 or less. You can also use this to save money for later life and buy a home in the coming years. You must be between 18 to 39 years to open up a LISA account.

You can keep adding £4,000 each year to your LISA account. You must add up your first payment in the account before you’re 40. The government will add a 25% bonus to your savings with a maximum £1000 each year.

What to look out for?

In order to reach a deposit of £4000 annually, you'd have to save £200 monthly.

The brighter side

You’ll have good capital saved up to get on the property ladder once you reach your retirement age. There are other options, too; you can consider while planning to buy your first home. We’ll keep you updated on what capital arrangement plans you could opt for to buy your first home!