First-time homebuyers may find it difficult to to get on the property ladder due to the high cost of a deposit. However, there are several government-backed schemes available to help first-time buyers purchase a property.
Get a government bonus
Both Help to Buy ISA and Lifetime ISAs offer a 25% bonus on your savings when you use them to buy your first home.
Although it is closed for new applicants, if you already have a Help to Buy ISA you can still put in up to £200 each month until November 2029. You can save up to £12,000 in a Help to Buy ISA and get a 25% government bonus (up to £3,000) when you use the money to buy your first home.
A Lifetime ISA (LISA) can be opened by anyone aged between 18 and 39. You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000 or for retirement, and the government adds a bonus of up to £1,000 a year on top.
The Deposit Unlock scheme
The Deposit Unlock Scheme is a home buying program developed by the Home Builders Federation in collaboration with lenders and the house building industry in the UK. The scheme enables eligible buyers to purchase a newly built home from participating home builders with a deposit of just 5%, which is significantly lower than the typical deposit required for a mortgage. The program aims to make it easier for people to get onto the property ladder by reducing the upfront costs associated with buying a home.
How do you apply for the Deposit Unlock scheme?
The first step is to find a new-build home included in the scheme at one of the participating developments. The housebuilder will confirm if the scheme is right for you.
When a mortgage advisor has qualified you for the scheme, the housebuilder will provide you with written confirmation so you can apply to specified lenders for a Deposit Unlock mortgage. The lender will advise if you meet their criteria for a mortgage loan. If successful, you can then reserve your new-build home.
Shared ownership
Shared ownership is another option for first-time buyers who are unable to afford to purchase a property outright. Under this scheme, the buyer purchases a share of the property and pays rent on the remaining share. You can take out a mortgage to buy your share or pay for it with savings. You’ll also need to pay a deposit, usually between 5% and 10% of the share you’re buying.
When you find a home you want to buy, you need to speak to a mortgage adviser who will assess your income and outgoings. They will tell you the share purchase you can afford based on your personal circumstances.
As your financial situation improves, you can gradually increase your share in the property until you own it outright - this is known as "staircasing".
Do I meet the eligibility criteria for Shared Ownership?
You can buy a home through shared ownership if both of the following apply:
- your household income is £80,000 a year or less (£90,000 a year or less in London);
- you cannot afford all of the deposit and mortgage payments for a home that meets your needs.
First Homes scheme
If you're trying to buy your first home where you work or live, but are struggling to save the required deposit, this scheme was designed to help. First Homes is a new scheme designed to help local first-time buyers and key workers onto the property ladder, by offering new-build homes at a 30% - 50% discount. The scheme aims to offer affordable homes to first-timers, local residents and key workers.
Eligibility criteria includes:
- Being a first-time buyers in England who is either local or key worker, or in the Armed Forces;
- Having a maximum household income of £80,000 (£90,000 in London);
- Taking out a mortgage that covers no less than 50% of the property’s purchase price.
How do you apply?
There’s no formal application process for the First Homes scheme; you need to watch out for newbuild developments in your area and then find out if the developer is offering any of the homes for purchase under the scheme.
Right to Buy
Lastly, there is also the Right to Buy scheme in England, which allows council tenants, as well as some housing association tenants, to purchase their council home at a discount.
How much is the Right to Buy discount?
Currently the biggest discount possible is £87,200 across England and £116,200 if you live in London, though these thresholds increase each April. How big a discount you can actually get depends on a few factors, including whether you live in a house or a flat, and how long you've been a public sector tenant for.
How do you apply?
You can either complete the RTB1 application form online, or ask your landlord for a printed copy. Your landlord will reply confirming whether or not you have the Right to Buy your home. If you are successful, your landlord will issue an offer notice (S125).This sets out the property value, discount, the price you’ll pay, any structural problems they know about, and any terms and conditions.
You have up to 12 weeks to accept your landlord’s offer and arrange for a mortgage loan.
All of these schemes can help first-time buyers overcome the challenges of purchasing a property, but it is important to research the different options and understand the terms and conditions before making a decision. We are here to help - discuss your needs with us, so we can help determine which scheme is most suited to you.
SPEAK TO AN ADVISER
Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.