One in five (22%) first-time buyers is hoping their parents will cough up more than half the funds they need to get onto the property ladder, according to recent research.
Over four out of five (81%) first-time buyers expect the Bank of Mum and Dad to contribute towards their property deposit, a survey by Nottingham Building Society found, whilst just over six out of ten (62%) are relying on an inheritance pay-out. A further 63% are planning to sell valuables to help build up a deposit.
Saving up a property deposit remains one of the biggest challenges facing many first-time buyers, particularly for those buying in areas where property prices are high. However, there are ways to give your savings a boost by taking advantage of government savings schemes.
Options for building a deposit
There are two government schemes available which are specifically designed to help first-time buyers raise a deposit. Here’s how they work:
• The Help to Buy ISA
You can save up to £1,200 in a Help to Buy ISA in the first month, and after that you can make maximum monthly contributions of £200. The government will top up any contributions you make by 25%, so if you put in £100, they’ll add another £25. The maximum they’ll give you is £3,000.
You must be aged 16 or over to open a Help to Buy ISA, and the proceeds can be used to purchase a property costing £250,000 or less, or £450,000 if you’re buying a property in London. Make sure you compare rates before opening an account so that you earn the highest rate of interest possible on your savings.
• The Lifetime ISA
The Lifetime ISA is a savings account for those who are either saving up to buy their first home, or who are saving towards retirement, or a combination of these. The government will boost any contributions you make by another 25%, and you can save up to a maximum of £4,000 into your Lifetime ISA each year. The bonus will be paid on any contributions you make until you reach 50 years of age.
The proceeds can be used to buy a first home costing up to £450,000 anywhere in the UK and you must be aged over 18 but under 40 to qualify for an account. Find out more about Lifetime ISAs here.
If you take out both a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of these accounts to buy a property. Check out our guide to government schemes for first-time buyers for more on how the accounts work.
Bear in mind that many lenders offer mortgages which only require you to put down a 5% deposit. Speak to one of our advisers if you need help working out which first-time buyer deals you might be eligible for.
First-time buyers look to parents for help