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How to get support when buying your first home

Buying your first home can be a daunting process. House prices are high and with all the pressures on young people, buying a property can seem like a near impossible task. But there is support when buying your first home available.

Buying your first home can be a daunting process. House prices are high and with all the pressures on young people, buying a property can seem like a near impossible task. But there is support when buying your first home available.

There is a lot of uncertainty in the world at the moment. Support measures are always subject to change, but are even more unpredictable at the moment. As the government looks to recover from the Covid-19 pandemic, all fiscal policies will be under review. This could work in first time buyers’ favour, as supporting people onto the housing ladder could provide a much needed boost to the economy.

I will update this post as and when changes are made, but for now this will cover the support currently available.

What support is available when buying your first home.
This picture shows a cottage surrounded by flowers and trees in a field.

In this post I will cover:

  • ISAs
  • Help to Buy Equity Loan
  • Help to Buy Shared Ownership
  • Family/friends support
  • Beginning your journey

ISAs

There are two options if you are looking for support when buying your first home: Help to Buy ISA and Lifetime ISA.

The Help to Buy ISA is now closed to new accounts. For those with existing accounts, you can take advantage of the bonus until November 2030.

If you already have a Help to Buy you can pay in up to £200 a month. When it comes to buying your first home the government will top up your savings by 25 percent – to a maximum of £3,000 – as long as it costs no more than £250,000 or £450,000 in London.

The Lifetime ISA (LISA) is still open. It offers different benefits.

To open a LISA you must be over 18 but under 40 and once opened you can put in up to £4,000 a year until you turn 50. The government will add a 25 percent bonus to your savings, up to a maximum of £1,000 per year.

There are only three criteria by which you can withdraw the money without a penalty charge. These are: if you are buying your first home; if you are aged 60 or over; or if you are terminally ill and have less than 12 months to live.

If you may the maximum amount in each year, it would only take three years to receive the same bonus as the Help to Buy. There also appears to be less restrictions on it, providing you use it for buying your first home.

You can transfer your Help to Buy to a LISA, as long as you don’t exceed your yearly ISA limit (currently £20,000).

Both options work for different people, so speak to an adviser if you’re considering switching.

Help to Buy Equity Loan

Those who want support when buying their first home, can take advantage of the Help to Buy Equity Loan. Here, they can borrow an equity loan of up to 20% (40% in London) of the sale price of a new build home.

How much you can spend on your home will depend on which region it is in, as does the amount you must fund.  You must fund at least 80% (60% in London) of the sale price with a mortgage and at least a 5% deposit.

There is no interest charged on the loan for the first five years. You pay a monthly management fee of £1 for the life of the loan.

You must repay the equity loan when you sell the home, pay off your mortgage or reach the end of your loan term. But, you can repay all or 10% chunks of the loan any time before then.

As always, reading the small print is important. At the bottom of the information page it says: “Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it.”

Applications for the Help to Buy 2021-2023 scheme can be made from now.

Help to Buy Shared Ownership

If you can’t afford the mortgage on a whole property, Help to Buy: Shared Ownership offers you the chance to buy a share of your home.

You can buy between 25% and 75% of the home’s value and pay rent on the remaining share. When you can afford to, you can buy bigger shares.

You can buy a home through Help to Buy: Shared Ownership in England if:

  • Your household earns £80,000 a year or less outside London or less than £90,000 in London.
  • You are a first-time buyer, you used to own a home but can’t afford to buy one now or are an existing shared owner looking to move.

With Help to Buy: Shared Ownership you can buy a newly built home or an existing one through resale programmes from housing associations. You’ll need to take out a mortgage to pay for your share of the home’s purchase price, or fund this through your savings. Shared Ownership properties are always leasehold.

It is worth noting with both this scheme and the equity loan scheme, that they are subject to change. If government policy changes you may find yourself in a worse position or struggling to sell your home.

This appears to be happening with the Shared Ownership scheme. While new applicants will be protected for the time being, people who have previously taken advantage of the scheme may well end up in a worse position.

Family/friends support

This won’t be an option for everyone. But, if you are in the position where family or friends can offer support, it may help you qualify for a mortgage or put together a deposit.

You can get someone else to guarantee your mortgage. This would usually be a parent or family member, but it doesn’t have to be.  Guarantor mortgages shouldn’t be entered into lightly. They’re legally binding arrangements. Your guarantor must be able to afford to pay your mortgage if you get into difficulty, because they will legally be required to.

Some also receive large parts of a deposit from their family. If you’re in this position, obviously it is a great privilege and can make a huge difference. But be wary of this. Earlier this year, Nationwide announced first time buyers had to prove at least 75% of their deposit came from the individual. Other banks haven’t followed suit yet, but they could do in time.

Beginning your journey

You may not be ready to buy your first home in the next year or so. There is support available for those just starting out saving.

One of those is the Help to Save scheme. It allows certain people entitled to Working Tax Credit or receiving Universal Credit to get a bonus of 50p for every £1 they save over 4 years.

Help to Save is backed by the government so all savings in the scheme are secure.

You can save between £1 and £50 each calendar month and you don’t have to pay money in every month. You get bonuses at the end of the second and fourth years, based on how much you’ve saved.

Some banks also other incentives to pay money into savings accounts. Although, currently, along with decent interest rates, these are few and far between. 

Conclusion

For those hoping to get on the property ladder, the measure is clear: don’t despair. The housing market is likely to change significantly over the next few months. Whatever it looks like going forward, you can get support when buying your first home.

The options discussed in this post will not be suitable or appropriate for everyone. Seek professional advice before committing to any scheme and make sure you research it thoroughly yourself. This is not designed to be a comprehensive guide, rather an overview of the options available.

If you found this post interesting, please like it and share across social media or send it to your friends. I’d also love to hear your thoughts and experiences, so please leave a comment! Are you looking to buy a home? Would you like support when buying your first home?

By The Twenty Percent

Hi I'm Katie and I use my blog to help young people take control of their personal finances.

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