As a young couple who have recently stepped onto the property ladder, we know how tough it is to buy your first house – we relocated to be able to afford ours! The following post is super useful for looking at the various options available to first time buyers:
Buying a house might not seem possible for the young person squirrelling a few hundred pounds a year aside for a deposit, knowing that their rent would easily cover a mortgage if they ever managed to gain one. But with house prices continuing to rise, and interest rates surely likely to rise in the next year or so, will the dream ever be possible for ‘Generation Rent?’
There is hope. The Conservative government has pledged to empower aspirational people to own their own homes, and wants to find ways of giving them options so they can continue to pay off their mortgage and not limit their lives at the same time. Here are three ways in which younger people can clamber onto the property ladder:
Help to Buy
The Help to Buy scheme was introduced in 2013 and has so far helped almostm100,000 buyers. For most buyers the biggest issue of buying is the deposit, and this scheme alleviates the problem by allowing people to buy with just a 5% deposit, plus a 20% Government-backed interest-free loan. There’s also a higher level of protection for the mortgage lender.
There are limitations: it can only be used on homes of a value less than £600,000, and not at all if you already own another home, but then the initiative is for people trying to get on the property ladder and not those wishing to add more rungs.
There’s also little danger of the scheme disappearing in the near future, as George Osborne recently pledged another £6bn for the equity loan portion of the scheme in 2016/17; that tranche of money is part of the pot which will continue the initiative until at least 2020. For more on Help to Buy, read this MAS guide.
Another scheme where a mortgage and loan combine to get you the keys to a property, but this time the loan comes from a housing association. Simply put; the buyer purchases a percentage share of the home (between 25% and 75%) and pays to rent on the remaining share.
Again, this is primarily aimed at those with lower incomes – in fact anyone with a salary of more than £60,000 may not apply. A family or first time buyer might only need a 5% deposit of a 50% share; so for example on a £200,000 house a deposit of just £5,000 might be enough. Bear in mind that the buyer will still also need to pay rent for the remaining half of the home.
It should also be recognised that a valuation needs to be carried out should you wish to buy up the remaining percentage of the home, and the housing association has first refusal on the remaining portion should you sell up.
Back in the ancient days when the coalition existed (March) the Starter Home initiative was launched, benefitting house builders through a change of policy which freed them from the requirement and costs of providing affordable housing when building on otherwise unusable commercial land.
As part of the compliance agreement, the developers had to offer the homes at a 20% discount to the market price, and this saving could then be passed on to first-time buyers under the age of 40.
The scheme, which could see the creation of 100,000 homes, is still in the early stages, but interested parties can sign up for information here.