With interest rates rising and the Help to Buy Loan scheme closed to new applications in October 2022, first-time buyers may be wondering what help is available to get onto the property ladder. Here, our new homes expert Nathan Bakhbakhi summarises three existing options.
Shared Ownership allows you to buy a percentage of the value of the home and pay rent on the rest. The percentage is set depending on what you can afford and ranges largely between 25% to 75%, with buyers able to purchase more equity in the property in stages, which is known as ‘staircasing’. It is important to point out that each time you staircase you will have to pay fees.
There is no cap on the value of the property you purchase (which must be a new-build or existing shared ownership home), but your household income must be £80,000 or less (£90,000 in London). Buyers should pay close attention to the rental costs, which can be significant – particularly in London.
Deposit Unlock enables first-time buyers and second steppers to buy a new-build property worth up to £750,000, with a deposit of 5%. It was developed by the Home Builders Federation (the HBF, which represents housing developers), its members and reinsurance broker Gallagher Re as a replacement for Help to Buy, and so works in a similar way.
The idea behind it is to make new-build properties more attractive to lenders. It does this by encouraging housebuilders, rather than the lenders, to pay the cost of insuring the mortgage through a percentage of income made from their house sales. Deposit Unlock was originally available via a small number of housebuilders and lenders, but it’s growing in popularity with an additional 50 housebuilders recently signed up to the initiative.
The First Homes scheme offers discounts of up to 50% (although more usually 30%) on new-build properties worth no more than £250,000, (or £420,000 in London) after the discount has been applied. This scheme is for first-time buyers only, with a household income of £80,000 or less (£90,000 in London) and who have a connection to the area in which they hope to buy.
If you’re a first-time buyer and would like to find out more about securing a mortgage, and if any of these options will work for you, please speak to us; we can advise you on the right approach for your circumstances.