For those looking to buy their first home in the UK, the process can be daunting. The UK property market is often particularly expensive and many first-time buyers struggle to get onto the ladder. Thankfully, however, the government offers a number of support schemes and initiatives to help first-time buyers make their dream a reality.
Help to Buy
The Help to Buy scheme is a comprehensive package of government support available for first-time buyers only, including both equity loans and shared ownership options.
For starters, Help to Buy offers an equity loan of up to 20% of the value of a house (or a maximum of 40% in London). Buyers are only required to pay a 5% deposit and then take out a mortgage for the remaining 75% of the cost. The remaining 20% loan is then provided interest-free for the first five years, after which interest is charged from the sixth year onwards.
Additionally, buyers can also opt for various forms of shared ownership. This means that the buyer rents the remaining portion of their home from a housing association, while at the same time having an option to purchase the entire property in the future.
Help to Buy has been widely hailed as a great scheme for first-time buyers in the UK, and has enabled over 350,000 people to get on the property ladder since the scheme’s launch in 2013.
Another government-backed scheme available to first-time buyers is the Starter Homes initiative. This scheme offers up to 200,000 discounted homes to first-time buyers between the ages of 23 and 40. Buyers taking advantage of this scheme will receive discounts of at least 20% of the market value of the property, which the government will pay for.
The Starter Homes initiative is, however, a little more restrictive than Help to Buy. For example, households will need to earn no more than £80,000 (or £90,000 in London), and must intend to live in the property for at least five years following the purchase.
The scheme has been welcomed by many in the UK, as it enables younger people to purchase property for a fraction of its market value. The scheme is still in the early stages however and has yet to be widely rolled out across the country.
Right to Buy
The Right to Buy scheme also gives first-time buyers an opportunity to purchase their own home. This scheme is available to tenants of social housing who have resided in their property for a minimum of three years.
Under the terms of the Right to Buy scheme, tenants can purchase their property at a discount of up to 70% off the market value (or a max of £110,000). The scheme has been available for over 40 years, and has seen over two million tenants take advantage of the programme to purchase their own homes.
Though the Right to Buy scheme has enabled many people to own their own home, the programme is no longer as accessible as it once was. The government implemented a ‘pay to stay’ policy in 2015, meaning that those earning over £30,000 (or £40,000 in London) are no longer eligible for this programme.
The shared ownership scheme is another option available to first-time buyers. This scheme allows buyers to purchase between 25%-75% of a property from a registered housing association, with the remaining portion rented from the association. This means that buyers can purchase a share of a far more expensive property than they would otherwise be able to afford.
The scheme is open to both first-time and existing homeowners, however there are some restrictions. Those taking advantage of the scheme must earn the equivalent of less than £80,000 a year, and must be unable to afford a home on the open market.
Shared ownership has won praise from many, as it’s a great way for first-time buyers to get onto the property ladder.
Clearly, there are multiple options available to first-time buyers in the UK. The government has put in place a number of initiatives and schemes to help first-time buyers get onto the property ladder. Each scheme has its own criteria and limits, however they all offer a potentially valuable opportunity for those looking to make their first home purchase.