What benefits do first-time buyers get?
It’s no secret that buying a first home can be overwhelming, especially when you’re up against the challenges of a volatile housing market and ever-changing interest rates – not to mention the constant reminders about how much easier it was for your parents and grandparents to buy their first homes back in the day.
It can often feel like you’re at a disadvantage as a first-time buyer as you’re less experienced than buyers who have done it already, but actually, you’ll find that you’re in a stronger position than you think. There are a number of schemes and benefits available to first-time buyers in the UK, which could land you on the property ladder sooner than you think.
What is a first-time buyer?
You’re officially considered a first-time buyer if the following applies to you:
- You’ve never bought a property to live in or to rent, in the UK or abroad
- You don’t have a property in your name that you could use to sell and buy a new home
- You’ve never inherited a property or been given a place to live as a gift
If you meet this criteria, then there are a number of benefits available to support you in your journey to buying a first home. Read on to find out more.
You have nothing to sell first
The most obvious advantage to your situation is that you aren’t tied to an existing home, which spares you all the legal and financial delays that people often have to face when they have a property to sell first. In many cases, this can actually make you a preferred buyer to potential sellers; since you have no chain and can offer more flexibility while also moving through the process faster. If you’re lucky, you may even find a seller who’ll accept a lower offer in order to make a quick sale.
Government support for first-time buyers in the UK
There’s been a number of government schemes introduced in recent years to support first-time buyers in the UK. It’s important to remember that some of these are only available for a limited time, or in limited parts of the country, and that there’s also a set of eligibility criteria to consider before applying. Here’s a list of the most up-to-date government schemes available for first-time buyers.
Shared ownership
The rules on shared ownership vary slightly between different parts of the UK, but the way the scheme works is by giving first-time buyers the opportunity to buy a home if they can’t afford all of the deposit and mortgage payments for a home that meets their needs.
In essence, the first-time buyer will buy a share of the property and pay rent to a landlord on the rest. The share itself can range from 10% to 75% of the home’s full market value, and applies to new build homes, existing homes enlisted in a shared ownership resale scheme, and homes that specifically meet the needs of a medical condition or long-term disability.
Lifetime Individual Savings Account (LISA)
If you want to buy a house, you’ll need to have savings to put towards it. This is where the Lifetime Individual Savings Account (LISA) can help.
With a LISA, the government will essentially top up the money you put away every year, which can help you save for a deposit faster.
You can open a Lifetime ISA at any point between the ages of 18 and 39, and you can deposit up to £4,000 per year into the account. The government will then add a 25% bonus to your savings, with a limit of £1,000 per year, until you’re 50.
Be aware that there’s a penalty charge of 25% if you withdraw cash for any reason other than buying your first home.
Help to build: equity loan
If you’re looking to buy land and build a new home on it, you may be eligible for government support in the form of the Help to Build: Equity Loan scheme.
Under this scheme, you’ll be able to apply for a government-backed loan which will cover part of the cost of building your home. Currently, this loan is only available to residents of England, with slightly different rules applying in Wales and Scotland.
You’ll only be considered for the loan if you’re definitely able to get a mortgage for the home you want to build, and the loan will cover a maximum of 20% of the overall land and building costs. Keep in mind that you can’t use this loan to build more than one home, nor can you use it for upgrades to an existing property.
First Homes scheme
The First Homes scheme is relatively new, and gives first-time buyers the opportunity to buy a home for 30% to 50% less than its market value.
The scheme is currently only available in England, and only applies to new-build homes. The idea behind the scheme is to ensure that new homes being built in the UK are accessible and affordable, with priority given to:
- Essential workers
- People who already live in the area
- Those on lower incomes
To apply for the scheme, you’ll need to look for new homes in your area that are being advertised by developers as being part of the First Homes scheme. Developers will then offer these homes to first-time buyers with 30% to 50% of the market value taken off the price. There are various eligibility conditions to meet, such as being 18 or older and being able to get a mortgage for at least half the price of the home, so you’ll need to review the finer details before applying.
Stamp duty relief
The government has changed its policy on Stamp Duty relief numerous times in recent years, so it’s always a good idea to check their website for the most up to date information.
Currently, Stamp Duty Land Tax Relief (SDLT) is available to first-time buyers, which basically means that you’ll owe less to the taxman when you purchase your property.
Stamp Duty Land Tax is a certain type of tax you pay when buying a house or flat, in addition to whatever you’re paying for the property itself. It’s not a flat rate for everybody, and those who are taking their first step onto the housing ladder will benefit from being relieved of stamp duty on any property up to the value of £425,000.
Exclusive mortgage deals
Certain lenders, such as Nationwide, will offer exclusive mortgage deals to those buying a property for the first time. It’s worth shopping around or speaking to a financial expert like the team at Lendese to find the best possible deal on your first mortgage before signing any dotted lines.
95% mortgages
95% mortgages allow you to borrow up to 95% of the purchase price of the home you want to buy, with the remaining 5% made up by your deposit. This can be a great way to get onto the property ladder sooner, as it requires you to save less of a hefty sum for the deposit. It’s worth speaking to a financial advisor to weigh up the pros and cons of a 95% mortgage before making any final decisions.
Helping Hand mortgages
This is a type of mortgage offered by a small selection of lenders as a means to make things easier for first-time buyers. A Helping Hand mortgage gives buyers the option to borrow a higher loan amount when taking out a higher 5 or 10 year fixed rate mortgage, which essentially gives people the financial boost they need if they otherwise couldn’t afford their first home. Again – there are pros and cons to consider with this type of mortgage, so be sure to speak to an expert to assess whether it’s the right option for you.
Bank of Mum and Dad scheme
This is a new scheme available to first-time buyers with a parent or family member who wish to contribute towards the cost of their first home.
The scheme is currently exclusively offered by property developer Persimmon, with the offer of ‘thanking’ family members with £2,000 if they contribute 5% or more towards the cost of the buyer’s first home. As always, there are a number of terms and conditions to meet, so it’s worth having all parties review these before applying for the scheme.
Ready to buy your first home?
Needless to say, there are a lot of big decisions to make when purchasing a home for the first time. As one of the biggest financial investments you’ll ever make, you’ll want to give this a considerable amount of thought – not just for how it’ll affect you now, but for the impact it’ll have on your future, too.
At Lendese, we have years of experience in getting people onto the property ladder – and doing it at the best possible rate. Speak to us today about buying your first home and let us take the stress out of the process for you.
