Currently, first-time buyers are driving the housing market, borrowers took out £300 million more in mortgages than last year, according to banks and building societies. Cheaper loans and government schemes with lower interest are encouraging buyers to save and get themselves onto the property ladder. From special tax-free savings accounts to shared ownership and innovative mortgages, there are options available to help buy your first home. Take a look at these top 5 options that have already helped millions…
Help to buy Lifetime ISA
If you’re saving towards your dream home, a lifetime ISA is a good choice, as you can get a boost of up to £1,000 free cash a year. You can save more into a LISA each year, £4000 more than you can into a Help to Buy ISA. You can also use the Lifetime ISA to purchase a high-value home at up to £450,000. To qualify buyers must be aged under 40, but over 18 to qualify.
What can you get out of a Lifetime ISA?
– You can transfer between providers.
– You get a free cash top-up.
– You can choose between cash savings and stocks and shares.
– You can deposit £4,000 a year, rather than face a monthly limit.
– It’s a tax-free wrapper
– You can purchase a property worth up to £450,000 anywhere in the UK
– If you and your partner both first-time buyers purchasing a property together, you can both open one and save – effectively doubting the bonus.
1. Help to buy ISA
These accounts help you save for a deposit and you benefit from the Government topping up your savings by 25%. You can put away an initial sum of £1,200. And can then save £200 per month after that, the government will give you a maximum bonus of £3000 once £12,000 has been saved.
Help-to-Buy ISA’s are also available for each first-time buyer, and not each household, this means if you and your partner were saving for your first home, you could each open a Help to Buy account and take advantage of the government schemes bonus. But Help to Buy ISA can only be used towards the total cost of the property, and not any additional fees such as solicitors and estate agent fees, or stamp duty etc.
What can you get out of a Help-to-Buy ISA?
– You get free cash to top up your savings
– Available from a number of banks and building societies
– These savings plans are tax-free
– You can transfer your ISA from one provider to another to chase the best rates
– This scheme isn’t limited to new-build homes
2. Shared ownership scheme
This scheme allows you to purchase a share of a new or existing home from a council or housing association, normally between 25% and 75% of the properties value. After living at the property for a certain period of time, you have the option to buy a bigger share of the property.
How can shared ownership scheme help you?
– You are only buying a share of a property, therefore a smaller deposit is required.
– Should make buying a home much more affordable.
3. Post Office Family Link Mortgage
If you are an aspiring first-time homeowner who can afford to repay a mortgage but you’re struggling to save enough for a deposit then the post office family mortgage could be the correct route for you. It allows you to secure a mortgage without a deposit by taking advantage of the help of your family. For the first five years, you will make two separate repayments, one towards the assistors mortgage (which is interest-free), and one towards your own mortgage, where interest rates will apply. With these arrangements you can use the equity in your parents’ home to help you get a deposit together, this means you don’t have to use your savings, and you won’t be draining your families hard earned savings.
What should you think about before applying?
When applying for a mortgage a lender will check your credit history and assess how much of a risk you are. These checks have become increasingly harder on buyers, due to the financial crisis back in April 2014. Furthering this the Bank of England also bought in restrictions, limiting the amount you can borrow. This will depend on your income, where banks will give you no more than 4.5 of your annual earnings. Buying a property is one of the biggest financial commitments a person can make and can be a daunting process for first-time buyers, so it is wise to seek professional advice, who specialises with in-depth knowledge of the market and who can look at a range of mortgage products to help you find your best deal.