Buying your first home is an exciting journey, but rising costs can make it feel daunting. Thankfully, there are several government and developer-backed schemes designed to help first-time buyers step onto the property ladder. Here’s an overview of the primary options available in 2024, each tailored to address specific challenges and financial needs in today’s housing market.
1. Mortgage Guarantee Scheme
Challenge: Saving a large deposit while renting
The Mortgage Guarantee Scheme is ideal for those struggling to save a significant deposit. Under this scheme, you only need a 5% deposit, as the government backs 95% mortgages from participating lenders. This guarantee reduces the lender’s risk, making them more likely to approve high loan-to-value mortgages.
Eligibility: Available UK-wide for properties up to £600,000.
Pros: Allows buyers to secure a mortgage with a 5% deposit.
Cons: Interest rates tend to be higher for 95% mortgages, increasing monthly payments.
Tip: This scheme is a good fit for clients eager to purchase soon but with limited savings for a deposit.
2. First Homes Scheme
Challenge: Affording a home in a high-cost local area
The First Homes Scheme offers first-time buyers a substantial 30-50% discount on the market price of a new-build property. Targeted at keeping communities together, it prioritises local buyers and key workers.
Eligibility: Available in England with local price limits; household income under £80,000 (or £90,000 in London).
Pros: Allows buyers to purchase in their area at a discount, lowering both mortgage and deposit requirements.
Cons: Resale restrictions apply, and finding properties available through this scheme may require local research. However, using the help of an estate agent with years of experience, you can find a home within your desired location with ease.
Tip: Perfect for clients looking to buy near work or family in more expensive regions, especially key workers.
3. Shared Ownership Scheme
Challenge: Limited income makes full ownership difficult
Shared Ownership enables buyers to purchase a stake (starting as low as 10%) in a property and rent the remaining portion from a housing association or council. Buyers can increase their ownership percentage over time through a process known as “staircasing.”
Eligibility: Household income must be under £80,000 (or £90,000 in London).
Pros: Low initial deposit and mortgage, potential to build equity over time.
Cons: Owners are responsible for repairs even with partial ownership, and there may be resale restrictions.
Tip: An attractive option for clients on lower incomes who are open to gradually increasing their stake in a property.
4. Lifetime ISA
Challenge: Limited ability to save for a deposit
The Lifetime ISA provides a 25% government bonus on annual savings up to £4,000, adding an additional £1,000 for those who maximize the limit. This tax-free savings account is designed specifically to help first-time buyers save for a deposit.
Eligibility: Open to individuals aged 18-39; capped at properties up to £450,000.
Pros: Provides a free boost to savings, potentially speeding up the deposit-building process.
Cons: Early withdrawals not used for home-buying incur a penalty, and annual savings are limited to £4,000.
Tip: An ideal scheme for young buyers starting their homeownership journey early.
5. Help to Build: Equity Loan
Challenge: The high cost of building a home
For those interested in building a home, Help to Build offers an equity loan that can cover between 5% and 20% (up to 40% in London) of construction costs, interest-free for the first five years. Buyers must secure a self-build mortgage first, and they have three years to complete the build.
Eligibility: Available for first-time buyers or homeowners building a primary residence.
Pros: Makes self-building more accessible and provides a five-year interest-free loan.
Cons: After five years, interest rates rise, and the exact costs can vary based on inflation.
Tip: Perfect for clients with a dream of self-building but needing financial support to make it feasible.
Additional Schemes
Other options with specific eligibility criteria include:
Right to Buy: For council tenants, offering discounts up to £96,000 in England (£127,900 in London).
Right to Shared Ownership: For long-term social or affordable housing tenants.
Home Ownership for People with Long-Term Disabilities (HOLD): A shared ownership option for disabled buyers.
Older Persons Shared Ownership (OPSO): Allows those aged 55+ to buy a share in an OPSO home.
Armed Forces Help to Buy: An interest-free loan of up to 50% of salary for service members.
Each scheme offers unique advantages, catering to different financial situations and challenges first-time buyers face. As real estate agents, understanding the options and their nuances allows us to guide clients toward the right choice, helping make the dream of homeownership achievable for many. If your clients have questions, reach out to local developers or mortgage brokers participating in these programs to get the latest on eligibility and benefits. Want more information on the options available to you as a first-time buyer? Get in touch with Ashton White for expert advice, today.
