It is a difficult time to get onto the property ladder for many budding first time buyers. The Royal Institute of Chartered Surveyors (RICS) found that 38% of potential first time buyers are trapped in the rental sector because they can’t raise a deposit in order to buy a home. Yet ironically monthly mortgage payments are said to be a lot cheaper than monthly rental fees.
Many people strive to own their own home in the bid for independence and security. So the constant urge to want to own your own place is appealing but seemingly unreachable. The UK government has now set about creating schemes in which to help people who can’t afford large deposits to get onto the property ladder.
Here are some schemes to help first time buyers get onto the property ladder:
Rent To Buy
This option offers new build homes to rent with the view to buy a share of the property at the end of the rental period. Homes under this scheme have rent which is affordable and at 80% less of market rents. The homes are typically from housing associations on assured shorthold tenancies. The reduced rental period provides you with the opportunity to save for a deposit to buy a share in the home.The rent to buy scheme may also be known as “try before you buy” or “rent save buy”.
Right To Buy
The scheme introduced in 1980 is designed to enable social tenants in England to buy their council house at a discounted rate. Depending on how long you’ve lived in your home you will be given a discount on the asking price. If you currently rent a house the discount is initially 35% of the property value. Then it is 1% for each year beyond the qualifying period of 5 years up to a maximum of 60%. If you’re in a flat the discount is 50% and rises 2% each year up to a maximum of 70%. The maximum discount that anyone can get is £75,000.
The government backed scheme only available in England, is designed to help you buy a newly-built home by offering a mortgage of up to 95% of the property’s value. It’s available for those who are first time buyers or those who can’t afford a high mortgage deposit which is typical of most mainstream lenders. Under the scheme individual home builders will partner up with one or more of the mortgage lenders. Lenders who are involved in the scheme will only require a 5-10% deposit.
Under NewBuy you can buy a property up to a maximum of £500,000 offered by home builders who are participating in the scheme. New home buyers wishing to take advantage of the scheme will need to qualify for a mortgage in the usual way and need to responsibly repay the monthly mortgage payments.
Firstbuy Equity Loan Scheme
Aimed at first time buyers, it requires a 5% deposit and minimum 75% mortgage and you get a 20% initial interest-free loan to cover the difference. The government and housebuilders come together to offer the buyer a loan of up to 20% of the property’s value. The loan is then repaid on sale of the property. For the first five years the loan is free but after that you will incur a 1.75% which rises in line with inflation.
If you’re set on buying a home, there are various government backed schemes that will enable you to do so. However it is also vital to take into account extra fees such as stamp duty, mortgage arrangement fees and ongoing maintenance costs.
This article was brought to you by Access Mortgage Solutions who specialise in providing mortgages for those who may find it difficult, including Access Mortgage Solutions and it contractor mortgages.