As a first-time buyer, we understand you may face several challenges. The journey to home ownership typically begins with building your savings – the average deposit for a first home in England currently stands at around £68,000, equating to 23% of the purchase price. This figure varies across the UK, dropping to £39,000 in Northern Ireland, £34,000 in Wales and £30,000 in Scotland.
Securing the right mortgage deal for your circumstances is equally important. Lenders will require evidence of your financial stability and ability to make regular mortgage payments.
But the good news is that several government schemes are available to first-time buyers, helping you overcome these hurdles and get onto the property ladder.
1. First Homes Scheme
The First Homes Scheme offers first-time buyers in England the opportunity to purchase a property for 30% to 50% less than the market value.
How does the First Homes Scheme work?
Eligible first-time buyers can buy new build properties built by developers which qualify under the scheme for 30% to 50% less than the market value. The property you’re buying must have a market value of £250,000 or less (£420,000 or less in London). When you come to sell the property, the discount you received must be passed on to the buyer, and they must also be eligible for the scheme.
Who is eligible for the First Homes Scheme?
To join the First Homes Scheme, you must be over the age of 18, a first-time buyer and be purchasing a property in England. You also must earn less than £80,000 per year (£90,000 in London). Local councils can determine their own eligibility criteria and may prioritise key workers, local residents or individuals with lower incomes.
Can I buy with my partner using the First Homes Scheme?
You can purchase a property with the First Homes Scheme if you qualify for the criteria above and if both of you are first-time buyers. Your joint income can’t exceed £80,000 per year (£90,000 in London).
2. Lifetime ISA
The Government introduced Lifetime ISAs in April 2017. They aren’t exclusively designed to help purchase property, but first-time buyers can use them.
How does the Lifetime ISA work?
The Government gives you a 25% bonus on top of the money you put into your Lifetime ISA. You can save up to a maximum of £4,000 per year, giving you a maximum bonus of £1,000 per year.
Who is eligible for a Lifetime ISA?
To take out a Lifetime ISA, you must be over the age of 18 but under 40.
How can a Lifetime ISA be used to buy property?
You can use a Lifetime ISA if you’re buying your first property with a mortgage, and it has a value of £450,000 or less. You also must have had the ISA open for at least 12 months. If you’re buying with a partner, you can both use your Lifetime ISAs and claim the Government bonus if you’re both first-time buyers.
How is the Lifetime ISA bonus paid?
You must use a solicitor or conveyancer to act on your behalf when purchasing your first property to be eligible for the bonus. Once you’re ready to buy, they claim the bonus for you, and the provider pays the funds directly to them.
3. Shared Ownership Scheme
The Shared Ownership Scheme allows first-time buyers to purchase part of a property if they can’t afford the full deposit and mortgage payments.
How does the Shared Ownership Scheme work?
You buy a share of the property’s full market value. This is usually between 25% and 75%, although some homes allow you to buy a 10% share. You then pay a mortgage on the share you purchased and pay rent to the landlord on the share of the property you don’t own. You may also pay monthly ground rent and service charges.
Who is eligible for the Shared Ownership Scheme?
First-time buyers can purchase a property through the Shared Ownership Scheme if they have a household income of £80,000 per year or less (£90,000 per year or less in London) and can’t afford the full deposit and mortgage payments for a home that meets their needs.
Can you buy more shares in the future?
Buying more shares is possible – this is called “staircasing”. The more shares you buy, the less rent you pay the landlord.
What properties can you buy?
You can purchase new build homes and properties within a shared ownership scheme. Homes that meet specific needs, such as ground floor flats for those with disabilities, are also available.
4. Rent to Buy Scheme
The Rent to Buy Scheme is available to first-time buyers who rent, offering them a discount on rent to help them save for a deposit.
How does the Rent to Buy Scheme work?
This scheme offers renters saving for their first property a discount, typically around 20% below market rent. It’s not available for properties in London, but a London Living Rent scheme is available.
Who is eligible for the Rent to Buy Scheme?
All first-time buyers in England are eligible for the Rent to Buy Scheme if they’re employed (full time or part time) and can show that they’re able to pay rent and save for a deposit simultaneously.
How do you apply?
Use the Government website to search for organisations offering Rent to Buy homes in the area you’re looking for.
5. Help to Buy ISA
Help to Buy ISAs were in place to help first-time buyers boost their savings. The scheme was launched in December 2015 and ended in November 2019. That means that you can no longer open a Help to Buy ISA. However, if you already have an account, you can continue paying into it and have until November 2030 to claim the bonus.
How does the Help to Buy ISA work?
When saving through a Help to Buy ISA, the Government will increase your savings by 25%. This means that for every £200 you save, you’ll receive an extra £50.
How much do I need to save?
You can save up to a maximum of £200 a month, with an initial lump sum payment up to £1,200. The minimum Government bonus is £400, meaning you’ll need to save £1,600 before you can claim this.
What is the maximum Government bonus?
The maximum amount you can receive from the Government as a bonus through your Help to Buy ISA is £3,000. To get the full amount, you’ll need to have saved at least £12,000.
Who can claim the Help to Buy ISA bonus?
The Help to Buy ISA bonus is available to each first-time buyer, rather than each household. That means that if you’re buying a property with your partner, you could be eligible for a combined Government bonus of up to £6,000.
How is the Help to Buy ISA bonus paid?
When you’re closing on your first home, instruct your solicitor or conveyancer to apply the bonus. It’s then paid to them, and once they’ve received it, the funds go towards the deposit.
This guide to saving for a mortgage was produced in collaboration with L&C, the UK’s leading fee-free mortgage experts.
Ready to become a homeowner? Explore our range of brand-new homes across the UK and discover our unique homebuying offers to help you move. Start your journey today with David Wilson Homes.
Related Articles
-
- Nov 12, 2024
What is a house survey?
-
- Nov 15, 2017
What's the right size house for your family?
