With house prises rocketing and interest rates rising, it’s becoming more difficult than ever for first-time buyers.
Getting onto the property ladder seems like a near impossible task and it’s no surprise that some people are put off buying a home.
Thankfully there are certain financial Government schemes out there that aim to make securing a mortgage easier for new homeowners.
Below are three of the most beneficial schemes available at the moment that first-time buyers should take full advantage of before buying a home, outlined by Online Mortgage Advisor.
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Help to Buy: Equity Loan
This scheme is not to be confused with the Help to Buy ISA – which closed to new applicants in 2019.
The Help to Buy: Equity Loan launched on 1 April 2021 and is in place to aid first-time buyers who are looking to purchase a new-build home only.
To be eligible for this scheme, you need to be a first-time buyer over the age of 18, the property has to be sold to you by a Help to Buy registered housebuilder, and it has to be the only home you live in.
This scheme will run until March 2023.
A spokesperson for Online Mortgage Advisor also explained: “Depending on where you’re buying, there is also a sliding scale of the maximum property purchase price, which can be found on the UK Government website.
“Once accepted, you pay a minimum of a 5% deposit, and then arrange a repayment mortgage of at least 25% of the property.
“You can then borrow the equity loan to cover from 5% to 20% of the property value, and up to 40% if the property is in London.
“The equity loan you take out is then used to calculate the interest you’ll pay, and the equity loan repayments.”
Shared Ownership
The Shared Ownership scheme allows you to buy a percentage of the property, and then pay rent on the rest.
The share you buy tends to range between 25% to 75%, but some homes will allow you to purchase as little as 10% of the property.
In order to qualify for Shared Ownership, your household income needs to be less than £80,000 per year, you need to demonstrate that you cannot afford all of the deposit and mortgage payments for a home that meets your needs, you’re a first-time buyer, or you used to own a home but can no longer afford a new one.
“Once you become a partial owner, you’re then able to purchase more of the property if you want to, which is called ‘staircasing’, and allows you to buy 5% or more of the home at any time,” added a Online Mortgage Advisor spokesperson.
“If you then decide you want to sell the property, the landlord has the right to find a buyer first, or even buy it themselves, but if they’re unable to find a buyer, you’re able to sell your share of the house yourself.
“If you own 100% of the property, you’re able to sell your house as normal.”
The mortgage guarantee scheme
After the pandemic saw a huge increase in people wanting to buy their own home, the government looked at ways to give first-time buyers a better chance at getting onto the property ladder.
In April 2021, the government encouraged lenders to reintroduce mortgages for borrowers with less than a 10% deposit.
The mortgage guarantee scheme allows prospective buyers to put down at least 5% deposit, and secure a mortgage on the remaining percentage of the property value.
The scheme is open to new 95% mortgages until 31 December 2022.
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