First Time Buyer? Here’s how to get your foot onto the property ladder

First Time Buyer? Here’s how to get your foot onto the property ladder

July, 2019

In a time of increasing uncertainty, it’s becoming harder to get your foot onto the property ladder. Deposits can be hard to fund but without a sizeable one you risk unmanageable mortgage repayments (or no mortgage at all). However, were you aware that there are a number of government run or backed schemes that can help you purchase your first property?

Shared Ownership

The Shared Ownership scheme aims to help young people move onto the property ladder. It’s somewhere in between renting and buying – you can buy a share of between 25% and 75% of the house (which can be done through a mortgage), and then pay rent to the housing association that owns it. Over time you can increase your share of the house until you own 100% of it, which is known as ‘staircasing’.

In order to be eligible for this scheme, your household must be earning less than £80,000 a year (£90,000 in London). You must also be a first-time buyer, a previous homeowner who cannot afford to buy again or already using the scheme.

There are some cons to consider. Until you have 100% of the shares, you don’t technically own the property – the freeholder does, such as the housing association. You also have to pay service and maintenance costs, which may come included with a standard rental property. However, you have the security of assured tenancy and the repayments are often lower than what you would pay on the open market. If the pros outweigh the cons then this might be the option for you.

Help to Buy/Lifetime ISA

At first glance, these two schemes seem to be offering the same thing, however they offer separate benefits. These are two ISAs exclusive to first time buyers that see a bonus paid depending how much you save.

The Help to Buy ISA allows you to save up to £2,400 a year in monthly payments. You can earn £3,000 in bonus if you contribute the maximum amount over four years and eight months, or a 25% bonus yearly for anything under that. Once you plan to buy a house, you can use the savings to buy a property up to £250,000 (or £450,000 in London). You can use this money for a house once you’ve saved a minimum of £1,600 or you can withdraw it without the bonus at any time.

The Lifetime ISA lets you contribute £4,000 a year in lump sums. Assuming you save from the age of 18-49, you can earn a maximum bonus of £33,000. However, if you want to buy sooner, it’s a 25% bonus a year. Once the account has been open for 12 months you can withdraw it however if you don’t use it for a deposit on a mortgage then you face a penalty, unless you’re over 60.

A Help to Buy ISA is more flexible as it allows you to withdraw the money and if you are planning on buying quickly then this is the best option for you. If you are planning to buy a house in the future and you are confident that’s what you want to save your money for, the Lifetime ISA will offer a bigger reward.

If you want to get your foot onto the property ladder for the first time, it’s worth considering some of these options - you can get a lot more for your money than you realise.