The schemes that will help you buy for the first time
Buying a first home is probably the biggest financial challenge you’ll ever face, and there’s no magic wand to cut house prices or conjure up a deposit.
But there are schemes or products that boost affordability by reducing your initial outlay and keeping monthly payments at a manageable level.
From specific discounts to Help to Buy, choose from a whole host of schemes to help you get a foot onto the property ladder.
Help to Buy
The biggest gun in the government’s armoury of affordable housing schemes, Help to Buy provides an equity loan of up to 20% of the cost of a new-build, which is interest-free for five years and doesn’t have to be repaid until the property is sold.
Purchasers only need a 5% deposit, with a 75% mortgage making up the rest, and own 100 % of their home. In London, where they face the nation’s most exorbitant prices, the loan is doubled to 40%, requiring a 55% loan-to-value mortgage. Maximum prices are currently capped at £600,000 nationwide, though lower regional thresholds take effect from April 1 2021, when a new scheme comes into operation.
Help to Buy: ‘I’ve been able to escape the mental trap’
Nick Willoughby, 38, who runs a media production company in Basingstoke, was determined to get on the property ladder. When he saw that Barratt Southern Counties was redeveloping an art deco former medicine factory – now called The White Building – he knew he’d found his future home. He bought a one-bed first floor apartment off-plan earlier this year, and has avidly watched the progress of the build.
‘I grew up in Basingstoke and was initially drawn to the history of the development’, says Nick.
‘The factory has always been a real landmark and my business partner also had connections to it, so it seemed as if I had some really positive links already.’
Nick used the Help to Buy equity loan scheme to purchase his home with a small deposit and a government loan. ‘I felt stuck in the rental trap as it was hard to save while spending so much each month on rent,’ he says. ‘In the end, I only had to save a 5% deposit, boosted by a special offer from Barratt.’
The White Building is at the centre of Barratt Southern Counties’ Chapel Gate scheme, and comprises one and two-bed apartments with large communal gardens and a hotel-style lobby. Prices start from £204,995 and Help to Buy is available. Reserve by September 30 to get your deposit boosted by £8,000 for a one-bed and £10,000 for a two-bed.
This part-own, part-rent initiative is for households who don’t earn enough or have sufficient savings to buy outright, as long as joint or single annual income doesn’t exceed £80,000, or £90,000 in London. It enables them to buy a share in a new or resale property which is repaid via a mortgage.
The deposit is much lower than usual as it’s only required for the stake purchased, rather than the whole lot, and shared owners pay rent, usually to a housing association, on the balance. More shares can be bought – in a process called staircasing – over time and as the percentage owned increases, rent falls.
Last week the government announced a new shared ownership model which will see the minimum initial stake reduced from the current 25% to 10%. This will be implemented through the new Affordable Homes programme beginning in 2021, with details to be published in due course.
Shared ownership: ‘I never thought I’d end up with such a lovely flat!’
Having lived in both social and private rented housing, Anna Pickles Harvey, an artist who works as a library assistant at the College of Art, was desperate to put down roots. ‘At one stage I moved four times in 12 months, and as I got older, I found it more difficult to share,’ says Anna, 36.
‘I’d always craved my own space and loved interior design, but hadn’t thought about buying for years as I didn’t think I could afford it. I knew of shared ownership but had heard some scary things about it and only started to consider it when a colleague recommended it, as she’d had a very positive experience when buying through the scheme. So I did a mortgage calculation and registered my interest on the Mayor of London’s Homes for Londoners website (london.gov.uk).
Anna had high hopes when she came across The Reach, a Peabody development in Thamesmead. It appealed to her because of the Brutalist architecture and the art culture history of the area – cult film A Clockwork Orange and TV series Misfits were filmed there.
Best of all, Anna discovered that her budget would stretch to a good-sized one-bed shared ownership flat with a balcony. ‘I did my sums and realised that I could just about afford it. I was worried that Peabody wouldn’t accept me but trusted them as they’re not about making a profit,’ Anna says.
She moved in at the end of 2019 and is thrilled to finally have her own space.
She adds: ‘I love the feeling of being settled and being able to make my own decisions about my home. I’d definitely encourage people to look into shared ownership, I never thought I’d end up with such a nice flat.’
One-bed shared ownership flats at The Reach in West Thamesmead from £69,375 for a 25% share of £277,500.
Discount market sales
Some councils team up with developers to sell selected new homes at discounted prices to people on low and middle incomes. Reductions vary from 20% to 50% of the value, and buyers must already live or work in the borough. They pay for their home via a mortgage and there’s no rent on the remainder. The same discount is applied when they sell.
A number of companies specialise in delivering small but stylish, low-priced new apartments aimed at first-time buyers. The best known is Pocket Living, which sells private homes in the capital for at least 20% less than the market value.
Although compact, homes are brilliantly designed with no wasted space and shared areas, such as roof terraces, to encourage a sense of community. To be eligible, applicants must have a local connection and earn no more than £90,000. Key workers make up 40% of sales and Help to Buy is also available.
Help to Buy Under this scheme, serving members of the armed forces can borrow up to 50% of their salary, capped at £25,000, to put towards a purchasing a home. Most mortgage lenders allow this money to be used as a deposit. It is interest-free although a monthly insurance fee is charged, and repaid over ten years.
Key worker discounts
Some housebuilders have introduced or extended existing incentives to reward NHS staff and other essential workers. For example, Barratt Homes is providing a 5% deposit, Mulberry Homes is offering a £500 contribution for every £20,000 spent and there’s a £5,000 discount on Weston Homes’ sites across London and the south-east. If you’re a key worker, ask if the developer’s offering such a scheme and check the deadline – many finish at the end of 2020.
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