Understanding the routes available to first-time buyers can be confusing. To simplify the choices, we compared every first-time buyer scheme in the country, from Help to Buy and Shared Ownership to the Lifetime ISA and First Homes scheme.
Demand for property skyrocketed online as lockdown eased across the country back in June. Google searches for 'first-time buyers' leaped by almost 50% compared to last year as buyers flooded back to the UK market, with searches for 'new build homes' and 'houses for sale UK' jumping by 34% and 64% respectively. Now, as work from home becomes the new normal for the foreseeable future, people across the country are on the hunt for the perfect space.
Fortunately, there are loads of routes onto the property ladder, both for first-time buyers and second steppers looking to upsize. Here's what you need to know:
Which First-Time Buyer Scheme is Right for You?
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Help to Buy is a Quick Way to Step Onto the Property Ladder
With a 5% deposit, buyers using the Help to Buy scheme can benefit from a 20% loan from the government, which means a mortgage only needs to be secured for the remaining 75% of the property's value. Help to Buy London gives those buying in the capital a 40% loan, with a mortgage requirement of up to 55%. A Help to Buy loan is interest-free for the first five years.
- Buy a home quickly
- Deposits are low
- Interest-free borrowing for five years
- Limited to specific new-build homes and Help to Buy properties
- Can't buy a home for more than £600,000
- The loan becomes more expensive over time
The New Help to Buy Equity Loan Scheme Will Benefit First-Time Buyers
The new scheme is set to replace the existing Help to Buy scheme in April 2021. The offer is still largely the same; borrow between 5% and 20% (or 40% in London) of the purchase price of a new build, and pay no interest for the first five years.
- First-time buyers don’t need a large deposit
- Interest-free repayments for five years
- Get good mortgage rates
- Limited to first-time buyers only
- Regional caps around the country
- The loan becomes more expensive over time
Shared Ownership is Helpful if You Have a Small Deposit
This scheme gives you the chance to buy between 25% and 75% of your home's value while paying rent on the remaining share. When buying 25% of a home, you typically only need to put down a 5% deposit on the share you are buying instead of full market value. You then have the option to purchase more shares in your home at a later stage through a process called 'staircasing', until you own 100% of the property.
- The portion of the home that you own will grow in value
- Deposits are low
- Mortgages are more accessible, even if you are on a lower wage
- You are responsible for 100% of the ground rent and service charges on your property regardless of how low your share is
- There will be restrictions on home improvements
- Not all lenders offer Shared Ownership mortgages
A Lifetime ISA Is Great if You're Already Saving For a Home
A Lifetime ISA (Individual Savings Account) enables you to put up to £4,000 a year into an account to save for your first home. If you're already saving for your first property, it makes sense to transfer your funds into this type of account to benefit from the additional bonus. The government adds a 25% bonus to your savings of up to £1,000 a year. You can then withdraw the money from your account to buy your first home.
- Grow your funds quickly to buy a home faster
- Benefit from a 25% bonus on your savings
- You can top up your account annually or monthly
- Can't buy a home for more than £450,000
- Those with an inherited property are not eligible
- An account must be active for 12 months before the bonus kicks in
The First Homes Scheme Helps You Save on a New Build
This is a new scheme that enables first-time buyers to get a 30% discount against market value on homes across the country, reducing deposit and mortgage needs. Details of this scheme have not yet been finalised, but it does intend to help first-time buyers afford property in the areas they grew up in, rather than be priced out.
- Get a discount of up to 30% on the market price
- Pay a reduced deposit
- Can't buy a home for more than £250,000 in England or £420,000 in London
- Income caps apply – you must earn less than £80,000 in England and £90,000 in London
First Dibs Gives Locals the Most Competitive Advantage
This scheme was announced by Mayor of London Sadiq Khan in 2018, to ensure locals get 'first dibs' on new homes for three months before they are marketed to an overseas audience. First Dibs for Londoners gives anyone living in the capital a month head start on the three months before it rolls out to the rest of the UK.
- Exclusive access to new builds on the market
- You only need to compete with the local market
- There are plans to start construction on 90,000 new homes by 2021, but this has yet to be confirmed by the government
- The scheme only applies to homes up to £350,000
- Supply can't currently meet demand
- The policy is voluntary and not all housing associations offer it
Discount Market Sale Is Ideal if Location is Not a Priority
This low-cost home ownership scheme enables new build properties to be purchased with discounts of up to 20% or more. To be eligible, you must live in the area in which you want to buy. Each council has its own requirements to be eligible.
- Helpful for low and middle-wage earners
- Benefit from discounts of up to 20% and more
- Purchase a property in an area you grew up in
- You must be a resident in a borough that offers the scheme
- Your annual household income can't exceed 45% of the property's discount market sale price
- Not all councils and housing associations offer the scheme
Save Even More on your First Home with Stamp Duty and Tax Relief
Until March 2021, anyone buying a home in England will pay reduced Stamp Duty Tax. In England, properties less than £500,000 will require no stamp duty. This rate will last up until 31st March 2021 and can help first-time buyers save a chunk of cash when buying their first home.
Find your ideal home in London with the help of specialist agents at Douglas & Gordon.