After nine years, the Help to Buy scheme is coming to an end. With the application deadline having already passed – the attention for first time buyers now turns to the available alternatives. 361,075 homes were bought with a Help to Buy equity loan between April 1st, 2013, and March 31st, 2022 – a £22.5 billion hole left to be filled by alternative schemes. So, what other schemes are out there and available to help first-time buyers get onto the property ladder?
First Homes Scheme
First launched in June 2021, the First Homes scheme is an initiative involving first-time buyers, key workers and local people. The scheme allows those who fit the criteria to purchase a new build property at 30% to 50% less than its market value.. When said buyers eventually decide to sell, that discount is passed onto the next buyer to encourage a continuing chain of opportunity for first-time buyers to buy affordable homes.
The home can be:
- a new home built by a developer
- a home you buy from someone else who originally bought it as part of the scheme
The First Homes scheme is only available in England.
The scheme is still in its infancy with only a handful of developments currently available. However, with the end of Help to Buy almost upon us – First Homes could see an increase in both availability and popularity as we head into 2023.
Similar to Help to Buy, Shared Ownership is a government scheme that allows prospective buyers to purchase a share of a property from a housing association and pay rent on the rest. As long as the share being purchased is between 10% and 75% of a home’s full market value (though the % available is different depending on your region as Scotland, England, Wales and Northern Ireland all have differences in their schemes)
You can buy a home through the shared ownership scheme if you cannot afford all of the deposit and mortgage payments for a home that meets your needs.
There are different rules on:
When you buy a home through shared ownership, you:
- buy a share between 10% and 75% of the home’s full market value
- pay rent to the landlord for the share they own
- usually pay monthly ground rent and service charges, for example towards the maintenance of communal areas
You can buy:
- a new-build home
- an existing home through a shared ownership resale scheme
- a home that meets your specific needs, if you have a long-term disability – for example, a ground floor flat
Shared ownership homes are offered by housing associations, local councils, and other organisations. They are called ‘providers’ or the landlord.
All shared ownership homes (houses and flats) are leasehold properties.
The share you can buy is usually between 25% and 75%. You can buy a 10% share on some homes.
You can take out a mortgage to buy your share or pay for it with savings. You’ll also need to pay a deposit, usually between 5% and 10% of the share you’re buying.
You can buy more shares in your home in the future. This is known as ‘staircasing’. If you buy more shares, you’ll pay less rent. The amount of rent you pay will be based on the landlord’s share.
You should be aware that shared ownership is very different from shared equity.
On top of the schemes still available to help you buy a home, there are also government initiatives to help you save. When saving for a deposit for your first home, using a Lifetime ISA enables you to save £4,000 a year of your own money. The Government then add 25% of whatever you save for that tax year– meaning you could gain up to £1,000 extra every year.
You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. The money must then be used to either buy your first home or to fund your retirement.
You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40.
You can hold cash or stocks and shares in your Lifetime ISA, or have a combination of both.
When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns.
Although the Help to Buy scheme is now coming to an end and there are no direct replacements as of yet, there are still initiatives in place to help you get your first mortgage. If you’re considering buying your first home, contact us to discuss the options available to you.
Telephone: 0330 135 8047
- Mortgage Intelligence (Published December 2022)