For people who are looking to get their own home for the first time, the housing market can seem quite daunting. Fewer people are able to buy or rent a house today than a few years ago. But the government has several schemes to give first-time buyers a leg up on finding the home for them. This is an explanation of those schemes, as well as how to make the most of them so that you get the assistance you need.
Help To Buy
Help to Buy is a scheme for first-time buyers who have a small deposit when buying a home. You are eligible for the scheme if you have at least a 5% deposit. There are a couple of ways to use the Help to Buy scheme. First, you can take out an equity loan if you are buying a new build home. An equity loan would ensure that you can borrow 20% of the purchase price interest-free. This would be true for the first 5 years as long as you have a 5% deposit.
Another option is mortgage guarantees. These are available for both new and old properties in the UK. When you take out a mortgage guarantee, the government will cover any of your mortgage lender’s losses as a result of the problems you have in paying it back. Under this scheme, you will still have the responsibility for making your mortgage repayments regularly, but you are given a buffer by the government to take on some of the financial responsibility if you fall on hard times or experiences crises making it more difficult to pay your mortgage. This guarantee smooths out any bumps in the road to home ownership.
Right To Buy
A service for tenants in England, Wales and Northern Ireland who rent housing from the local council or housing association. Right to Buy allows tenants to buy their council housing at a discount. Right to Buy was implemented as a government policy in 1980 by Margaret Thatcher, to make the ideal of home ownership a reality for a greater number of people. In 2005, the rules of Right to Buy were changed, now requiring 5 years’ tenancy for tenants to qualify. Also, if the new owner of a property which they bought under Right to Buy decides to sell, it can’t immediately be put up for sale. They must approach their previous landlord, which is the council of housing association who sold them the house, to offer a “first right of refusal”. This allows the council or building association the chance to buy the property back. If they are no longer in existence, then the property is to be first offered to whichever local housing authority is in place.
More recent changes have affected the Right to Buy scheme. In April 2012 the Right to Buy discount was increased to a maximum of £75,000 or 60% of the house value, whichever is lower. In March 2013 the maximum in London was raised to £100,000. Also, if the property is sold on within 5 years of being bought, part or all of the discount will need to be paid back. In July 2013, the Scottish government confirmed that Right to Buy would be abolished in Scotland in 2017.
Shared Ownership
Under shared ownership, you buy a share of a property from a landlord, again usually the local council or housing association. The remaining share of the house is renting, so that you can take out a mortgage to pay for the share of the house you own, between a quarter and three quarters of the property’s value, and pay a reduced rent on the share you don’t own. You can then buy a bigger share of the property later when you are in a better financial position to do so, up to and including the entire property. This staircase towards full home ownership is geared towards helping first-time buyers and can usually only be undertaken for newly built properties. If you are disabled, financially unstable or otherwise unable to raise a mortgage, the landlord of the property can choose to waive the need to take out a mortgage, but you will be required to undergo a financial assessment to establish how much of the property you can afford to take on.
First Steps London
This is a service eligible to people with a gross household income of no more than £71,000 per annum if they want to buy or rent a 1 or 2 bedroom home. If you’re looking to buy or rent a family-sized home with three or more bedrooms, you must have a gross household income of no more than £85,000 per year. Another requirement is that you are unable to secure housing to adequately meet your needs on the open housing market.
First Steps is an intermediate housing programme established by the Mayor of London for people living in London. You can check your eligibility and if you are eligible register online. You can then search for properties which are held to help low and modest income Londoners buy or rent a home at a price that they can afford. It has become increasingly difficult for people living in London to buy or rent properties and this scheme is a step to correcting this.
Rent to Save
Rent to Save involves setting the rents of council housing at lower than the market rate, meaning that even if you cannot afford a mortgage you will be able to save up to buy a house while you rent. Calculating based on rent levels and mortgage prices, the rent will be set so that the tenant will have a sufficient deposit for a mortgage in less than 2 and a half years.
This agreement can be ended at any point by the tenant, the household provider will regularly check that you are saving a sufficient amount for a mortgage and the period of tenancy can be extended if you need more time to save up to buy the property.
