Buying a property for the first time is nearly always a daunting experience, without throwing a global pandemic and the threat of an economic downturn into the mix.
However, much is being done to help those make that initial, scary step onto the first rung of the property ladder.
Here is a breakdown of what support is currently available for people looking to become homeowners.
The First Homes initiative
This newly introduced Government scheme allows first-time buyers in England to apply for a discount of up to 50 per cent on a new-build home.
It is thought this initiative could save buyers at least £100,000, but experts are predicting this could lead to a scramble for properties as demand exceeds supply.
But the government has said the new approach will give lower paid people – many of whom worked on the frontline during the pandemic – a much-needed helping hand when it comes to owning their first home.
Once the discount has been approved it then must be passed onto the next first-time buyer which means these houses will always be sold under their market value.
“This is a great way to help people who have always wanted to buy their own home, explains Dean Williamson, director of LW Developments.
“By essentially capping these new-builds it gives everyone a chance. It’s also supporting people who want to remain living in a particular area but might have struggled to afford the market value in a particular location.”
Help to Buy Equity Loan scheme
This scheme offers people who have a deposit of at least five per cent of the asking price an equity loan. That means the government will lend first-time buyers money so they can buy a new build.
This initiative is only available for people in England who are looking to buy their first, main property, so anyone wanting a second home would not be allowed to apply.
Up to 20 per cent can be borrowed, but in London that amount is doubled because prices are so much higher in the capital. There is no interest to be paid for five years, but once you reach the sixth year then interest on the equity loan amount borrowed is owed. The equity loan payments are interest only, so the amount owed is not reduced, although all, or part of the equity loan, can be paid back at any time.
“The benefits of the Help to Buy Equity Loan scheme is you don’t have to wait until you’ve built your deposit,” Dean says.
“Plus you get access to cheaper mortgage rates and your loan is interest-free for five years. There’s a reason why the scheme has already helped more than 200,000 people buy their first house.”
The Mortgage Guarantee scheme
This initiative is not just available for first-time buyers, but also people who are seeking to move further up the property ladder.
It was announced in the March 2021 Budget and provides support to those who have a small deposit but wish to get a mortgage on a house worth up to £600,000.
Only a five per cent deposit is required and lenders are given a government guarantee
that it will compensate them if the property is repossessed or sold for less than the value of the outstanding mortgage.
In exchange, the lenders must offer a five-year fixed rate within the new product range. This also gives peace of mind to the buyers as they know that their payments will not increase if interest rates go up.“COVID-19 has damaged the property market significantly and we’ve seen the number of low-deposit mortgages plummet,” Dean says.
“But this scheme aims to give banks the confidence to offer 95 per cent mortgages again by taking on some of the risks involved with doing so.”
For further guidance on freehold land or property get in touch with LW Developments on 01992 447 713 or email dean@lwdevelopments.com
Dean Williamson MRICS
dean@lwdevelopments.com