How first time buyers can get onto the property ladder amid rising house prices
The latest data compiled by the Land Registry has shown that the average house price in the UK is £244,513 and property prices have risen by 1.7% from August 2020 to September 2020. The average annual increase in house price has risen by 4.7%.
For those trying to get onto the property ladder, this surge in house prices can be extremely frustrating. Therefore, here at Versus Law, we’ve decided to put together the different funding options for first time buyers to help you:
1. Help to Buy
Unfortunately, the Help to Buy ISA is no longer open to new applicants. Consequently, unless a first-time buyer already has an ISA open, they will not be able to reap the advantages of the government bonus. The maximum bonus is £3000 and must be claimed by 30th November 2030.
Nevertheless, the Help to Buy Equity Loan scheme is still available. This is only available on a new build property and to those looking to buy their first home. A minimum of a 5% deposit will need to be provided by the buyer, for the government to lend 15%-40% (reliant on the region). This scheme is an interest-free scheme for the first five years and is entirely repayable after 25 years.
The repayment amount is linked to the amount you borrowed. Thus, if you borrow 20% when you come to repay you will be liable for 20% of the market value of the property at that time. This scheme is available until March 2021, at which point it will be replaced by a new scheme.
2. Lifetime ISA
Another ISA is available. This is the Lifetime ISA (LISA). The goal of a LISA is to support 18-39 year olds to save for their first home/ retirement. For every £4000 saved per annum, you will qualify for a 25% bonus, which is paid monthly. If the individual is under the age of 60, the funds must be used towards the purchase of their first property (with a property value cap of £450,000).
3. Springboard mortgage
These types of mortgages have been on offer for quite some time now, however, not many people know about them. This is where the first-time buyer will need to put down a 5% deposit, and a family member puts down an additional 10% which is to be paid into the account of the lender. After three years, the family member will get back their 10% if the first-time buyer has kept up with their mortgage repayments.
4. Getting help from parents
Many first-time buyers benefit from gifts from family to get them onto the property ladder. To most lenders, this is satisfactory, as long as the family member has no interest in the property. A family member could also choose to guarantor a mortgage if the first time buyer does not have sufficient credit.