TIPS TO BECOMING A FIRST-TIME BUYER
Buying a home may seem like an impossible dream for ‘generation rent’, but it can be done.
Stamp duty scrapped
First, the good news. Stamp duty has been abolished for first-time buyers. Chancellor Philip Hammond scrapped the tax for first-time buyers purchasing a home of up to £300,000 in the Autumn 2017 budget. For properties costing up to £500,000, no stamp duty will be paid on the first £300,000. The average saving for a first-time buyer will be £1,700 – not a huge sum but one less bill to pay.
Saving for a deposit
Rising house prices mean many young people struggle to save for a deposit. Government has stepped in with new Help to buy ISAs and Lifetime ISAs offering new incentives to save. Under the Help to Buy ISA, the state will add 25 per cent free cash on top of your savings and it could be worth thousands of pounds. You can save £1,200 in the first month and £200 in subsequent months. The scheme still works if you put in less. Lifetime ISAs (LISAs) are similar but the cash can be spent on a home or pension. If you are eligible, you can save up to £4,000 a year in a LISA as a lump sum or by putting in cash when you can. The state will then add a 25 per cent bonus on top. If you save the full £4,000, you’ll get £1,000 on top.
First time buyer mortgages.
Lenders are becoming more innovative to help first time buyers get a foot on the housing ladder. For example, new mortgages that use a history of rental payments as evidence that borrowers can afford a loan. This can help those who don’t have a good credit rating to qualify for a loan. Other mortgages on the market include key worker mortgages, family and friend mortgages, Forces help to buy and shared equity mortgages
Help To Buy Mortgage
Today to be offered a mortgage you will need at least a five per cent deposit. The government-backed Help To Buy equity loan scheme is available for new-builds costing a maximum of £600,000. Under this scheme, first-time buyers and home movers who can save a minimum five per cent deposit may be eligible for a loan of up to 20 per cent of the purchase price. This means they only need a 75 per cent mortgage to pay the balance- making the loan repayments more affordable. The loan is interest free for the first five years only and usually repaid when the property is sold. To learn more see this article on the Help to Buy Scheme
If you can’t scrape together a five per cent mortgage deposit, it need not be the end of your home owning dream. Shared ownership, offered by housing associations, allow you to part-buy and part-rent your home. Applicants buy a 25 to 75 per cent share in the property with a mortgage and pay rent on the rest. There is the opportunity to buy further shares, a process called staircasing, until they have 100 per cent ownership. Find out more on the Government’s shared ownership page https://www.gov.uk/affordable-home-ownership-schemes
The average cost of moving home is £11,500, rising to £32,000 in London, according to Lloyds Bank. To help cut costs, some house builders contribute to legal fees or removals bills, potentially saving thousands of pounds. Furnishings, garden landscaping and even gym membership may also be thrown in. Meanwhile major banks are now offering lump sums to first-time buyers who put money into a saving account for a fixed period while taking out a mortgage at the same time. These are known as “save to buy” mortgages. Nationwide, for example, offers £500 cashback to those taking out a first mortgage with them.