The global pandemic didn’t make getting on the property ladder any easier, but there is help available for first-time buyers. Let’s take a look at three of the schemes available and some of the merits and drawbacks of each.
Image Credit
Shared ownership
This type of property purchase enables people to buy a share of a home rather than having to afford the whole thing. Buyers can purchase 25 to 75 per cent of a property and pay rent for the percentage they do not own.
There is also a ‘staircasing’ opportunity, which means that people can buy more of their property when they have the funds available. Two of the major advantages of this type of scheme are the fact that it doesn’t rule out buyers who only have a small deposit and it doesn’t focus solely on new-builds.
The drawbacks of shared ownership include the fact that it generally involves leasehold properties with short leases. People may also find it harder to obtain planning permission if they want to build an extension.
Help to Buy loan scheme
A Help to Buy loan provides government-backed help to boost deposits and increase buying power when it comes to purchasing a property. To be eligible, buyers must have a deposit of at least five per cent of the price of the property they want to buy. This can be combined with an interest-free Help to Buy loan to cover a maximum of 20 per cent of the property price, or up to 40 per cent if a London property is involved.
Image Credit
This scheme aims to enable buyers to have the option of taking out smaller mortgages with better interest rates. The loans are interest-free for five years. Interest will start to accrue in year six, and borrowers must pay back the money within a maximum of 25 years. This will be earlier if they decide to sell the property.
The Help to Buy scheme is only available for first-time buyers and there are caps on how expensive properties can be. People can also only buy new-build properties.
Lifetime ISAs
Sometimes called LISAs, these can help to increase deposit savings with help from the government. The scheme can also be used for retirement savings. The benefits of the scheme are that the government offers a 25 per cent top-up when money is paid into a LISA.
Only £4,000 can be paid in each year and people can only make deposits when they are aged 18 to 50. The money can also only be used for a first home – not to upsize – and LISAs can only be opened by people under the age of 40.
