In 2013, the Government introduced the Help to Buy scheme on new-build houses. An interest-free loan that lasted five years, the scheme enabled thousands of people to get onto the property ladder.
In March 2023, the Help to Buy scheme came to an end, leaving first-time buyers unsure of where to turn to for property support. The good news is, there are plenty of other options on the market to consider which can get you on the ladder.
Shared ownership
Through shared ownership, home-hopefuls can buy a portion of their home – either through savings or by applying for a mortgage. This share is usually anywhere between 25% and 75% of the overall value of the house. Whatever share of the house you purchase, you’ll need to pay a 5%-10% deposit. For example, if your house is worth £250,000 and you’re taking a 50% share, you’ll only need to a pay a deposit on the £125,000 share.
When repayments begin, you’ll be paying a monthly mortgage on your share as well as a monthly rent to the housing association who owns the rest. Over the years, you can buy more shares in the property, also known as staircasing. Usually, you can buy 10% at a time, but this could go up to 25% on some leases. The more you own of the property, the less rent you pay to the housing association.
After a certain amount of time, there is the option to own 100% of the home. However, be aware that in some cases, you may only be able to buy a share of up to 80% – these houses are situated in ‘designated protected areas’. Check with your landlord to clarify if this applies to you.
Without the stress of needing a sizeable deposit, shared ownership is a brilliant way to take the first step onto the property ladder.
RentPlus
Founded in 2005, RentPlus is a lesser-known option on the market but one worth considering. It is the country’s only affordable rent-to-buy model that helps lower income households into the property market.
Initially, those moving into houses that are owned by RentPlus move in without paying any deposit. They’ll pay an affordable rent which will be paid to the housing association, with all repairs for the rental period included. Tenants can rent these houses for a minimum of five years to a maximum of 20. After this time, they’ll have the option to buy the house. When they buy the house, RentPlus will give homeowners 10% of the value of the house as a gifted deposit.
RentPlus homes are available in certain areas for people who have a combined annual income of £80,000 a year or less and are currently unable to save for a deposit.
Deposit unlock scheme
Previously, it was very hard for prospective homeowners to secure a 95% mortgage. This was because of the risk potential for the lenders. If a house was to be repossessed on a 95% and then re-sold at a lower market value, this would mean negative equity and the lender would lose money. This made lenders nervous, usually asking for at least a 15% deposit – especially on new builds.
However, the Government has introduced measures to guarantee lenders will not lose out when it comes to 95% mortgages. Any financial loss lenders face with 95% mortgages will be covered by the Government. This scheme is available for high street banks across the country, including HSBC, Lloyds, Santander, NatWest and Barclays.
First time buyers can now get a mortgage with just a 5% deposit for new-build properties with certain developers up to £750,000 in value.
Nationwide Helping Hand
With a Helping Hand from Nationwide, first-time buyers can borrow up to 20% more than usual. On Nationwide’s website, it outlines that an eligible couple with a joint income of £55,000, a 5% deposit and no other costs impacting how much they can afford could borrow up to £302,500. Compare this with the £246,950 they could borrow without the scheme and the benefit becomes clear.
To be eligible, you and anyone else buying the property needs to be a first-time buyer, have at least a 5% deposit and take out a 5- or 10-year fixed rate mortgage. It’s important to know however that you cannot use this scheme if you are self-employed or are using an affordable home ownership scheme.
Section 106 / Restricted resale home
A Section 106 property has strict restrictions on it when it comes to buying and re-selling, but ones that are favourable to all prospective homeowners, not just first-time buyers.
These homes are usually only able to be sold to people who have lived in the local area for a specific amount of time. Usually, this is three years or more, but it’s worth checking with the owner or with the local housing association if you’re unsure. You may also be considered if you have a permanent job or evidence of a firm job offer in the local area. Plus, you may need to show that you are in housing need nor able to buy a home in the open market. The home cannot be purchased if it is a second home or if you plan to use it as a buy-to-let.
If you qualify within these measures under Section 106, homes are sold at 25% discount price.
While Help to Buy has ended, first-time buyers still have plenty of options in the market to help them get a foot on the property ladder. If you’re a first-time buyer looking for mortgage support, speak to one of our advisers today.
