Over the last decade, the Help to Buy Scheme has helped over 350,000 people* become homeowners but as of March 2023 the scheme has come to an end for new applications. So now what?
There are a number of government schemes available to support people into the housing market, each with it’s own strengths and weaknesses. But before we explore these, it’s important to understand what the HMRC definition of a first time buyer is; A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the UK or anywhere else in the world and who intends to occupy the property as their main residence. - Gov.uk So unfortunately, if you’re buying with someone who has already owned property, you wouldn’t be able to access some of the schemes outlined in this article.
So, what First Time Buyer Schemes are available in 2023?
To begin we have the First Homes Scheme.
This scheme was introduced in 2021 by the Government to support local people and Key Workers into local properties. The main draw of the scheme is that the properties are sold at a discount of at least 30% and preference is given to those who have a local connection, or who are in the armed forces. There are a number of criteria to meet, which are determined by your local council. However, a drawback of this scheme is that you are only able to sell the property onto someone who also meets the First Homes criteria and the sale price must have the same discount applied as when you brought the property.
Here in Lincolnshire, the local district councils have made their criteria available on their websites, thus giving you an added insight into the strict criteria that you will need to meet.
Deposit Unlocked is another new scheme developed in collaboration with lenders and the home building industry**, enabling both first time buyers and home movers to purchase a new-build home with a 5% deposit. Generally, lenders prefer a large deposit for a new build property so it is refreshing to see a small number of lenders working together with the building industry to make new builds more accessible and at competitive rates.
As there are only three lenders offering the Deposit Unlocked scheme, the variety of products is small and only available through a mortgage broker. So if you’re interested in a property being built by one of the participating developers (full list can be found here), it’s well worth getting in touch to see what would be the best option for you.
Another alternative is Shared Ownership. Shared Ownership essentially does what it says on the tin, you buy a part (share) of the property and the seller / housing association retains the other part (share) of the property.
For example, if you purchased 25% of a property that was valued at £150,000 you would be required to cover £37,500 of the property’s value. This could look like a £3,750 (10%) deposit and then a £33,750 mortgage. In addition to the monthly repayments on your mortgage, you would also be responsible for paying rent on the 75% of the property that you do not own.
With many Shared Ownership properties, it’s possible to do something called ‘staircasing’ which is where you purchase a bigger share of the property, thus increasing your share of the ownership and a reduction in the rent that you pay on any remaining share. In fact, many Shared Ownership properties allow you to staircase until you own 100% of the property value***.
Shared Ownership isn’t exclusively for First Time Buyers but can open up the door to getting onto the property ladder.
Although Help to Buy has ceased, the Forces Help to Buy scheme has now become an enduring policy. Allowing service personnel*** the ability to borrow up to 50% of their salary, up to £25,000, interest free over ten years to put towards the purchase of the property & the associated purchase costs. Many lenders accept Forces Help to Buy, so working with a whole of market mortgage adviser, like WML, will enable you to find the best deal for your circumstances.
Do I need to use a scheme as a first time buyer?
The short answer is no.
Many of our first time buyers purchase their own homes without relying on these schemes to do so. Whilst having a larger deposit usually gives you access to a wider range of mortgage deals with lower interest rates, we have access to lenders across the market, so we also have access to mortgages that require a 5% deposit rather than the usual 10% upwards.
We also have access to products like Family Springboard mortgages, where a ‘helper' (for example, a family member) provides a deposit allowing the borrower to apply for a mortgage without a deposit in place themselves. The ‘helpers’ deposit is stored safely away for a fixed number of years, accruing interest, before being returned, providing the borrower has made their mortgage payments during that time.
The beauty of this type of mortgage is that the borrower can apply for a mortgage with as little as 0% deposit and the helper is able to place their capital in a savings account, often with good interest rates, with little risk that they would not see their money returned after the fixed term.
Most recently, Skipton have launched their Track Record mortgage, the first of it’s kind, allowing first time buyers with a track record of paying rent and household bills to access up to 100% lending. This mortgage is aimed at those already renting, with a good track record of paying bills, who have between a 0-5% deposit. There are, understandably, strict criteria for this mortgage but potentially one to discuss with our advisers if you feel it could be a good fit.
So is a scheme right for you?
That’s where having an in-depth chat with a mortgage adviser comes in. They will help you understand what you would be able to borrow and the best fit for your circumstances. As we mentioned in our last article, getting personalised support with your mortgage is, more often than not, going to result in you getting the very best deal available to you. As we are regulated by the FCA, you know you’re getting advice you can trust.
***Subject to criteria