How to get on the property ladder: A first time buyer’s guide

Buying your first home can be a real challenge, particularly given steep house prices in many parts of the UK. The good news is that there are lots of things you can do, including taking advantage of government first time buyer schemes, which can make getting on the housing ladder a little bit easier. Here’s our rundown of some of the options available to first time buyers which can help turn the dream of owning a property into a reality.

Lisa Parker
October 24, 2022

Get saving for a deposit

The bigger the deposit you can save, the easier it will be to get on the property ladder and the wider the choice of mortgages you’ll have available to you. Although 100% mortgages do exist, they are usually dependent on parents agreeing to keep a percentage of the purchase price in a separate savings account with the mortgage lender. If you’re struggling to save, write down a list of all your outgoings and look at any non-essentials you might be able to cut out. Lenders offer favourable rates to those with larger deposits to put down, so the more you can put away, the cheaper your monthly mortgage payments are likely to be.

The mortgage guarantee scheme

The mortgage guarantee scheme was unveiled in the March 2021 Budget and aims to help first time buyers and home movers who’ve managed to save a 5% deposit but need some additional help to get on to the property ladder. Buyers can purchase a property costing up to £600,000 using their 5% deposit. The Government will guarantee the mortgages offered, which means if the property is repossessed or sold for less than the value of the outstanding mortgage, some of the lender’s losses will be covered. The scheme is scheduled to run from April 2021 until December 2022. The terms of the scheme require lenders to offer a five year fixed rate as part of their product range, to help buyers looking for certainty in their budget. The mortgage guarantee scheme is similar to the Help to Buy mortgage guarantee scheme which ended in 2016.

Right to Buy

The Right to Buy mortgage scheme enables council tenants in England to buy their council home at a discount.

How does it work?

Right to Buy gives you a discount on the market value of your home up to £84,200 across England, or up to £112,300 if you’re in London. The amount increases every year in line with the Consumer Prices Index (CPI) measure of inflation. The actual discount you’ll receive depends on how long you’ve been a tenant, the value of the property, and the property type, for example, whether it’s a flat or a house.

Who’s it for?

Council tenants whose council property is their only or main home, and the property is self-contained. You must have had a public sector landlord such as a council or housing association, for three years.

Advantages of Right to Buy

• You’ll get a discount off the property’s market value, to help make buying your property more affordable.• After 5 years you can sell your home without having to repay the discount

Disadvantages of Right to Buy

• If you’re buying a flat, you’ll have to pay a service charge to the council or housing association for the building’s maintenance. • You won’t qualify for housing benefit once you own the property.

Shared Ownership

Shared Ownership schemes allow you to buy a share of a property from a council or housing association, and pay rent on the remaining part, with an option to buy a bigger share later.

How does shared ownership work?

You can buy an initial share in the property, typically for between 25% and 75% of the property’s value. You can buy further shares, known as staircasing, up to a value of 100% of the property later if you want to.

Who’s it for?

You’ll be eligible for Shared Ownership if your household earns £80,000 a year or less outside London. This rises to £90,000 if you live in the capital.

Advantages of shared ownership

• The amount you’ll have to put down as a deposit is much smaller, as you’re only buying part of the property. • The scheme makes owning a property more affordable for those who wouldn’t be able to buy a home outright.

Disadvantages of shared ownership

• When the property is sold, you’ll only make a profit on the portion of the property you own. The remainder will go to the housing association or council. • If there’s a loss, this will also be split between you and the council or housing association relative to the shares you own.

Co-ownership in Northern Ireland

Co-ownership in Northern Ireland works in a similar way to Shared Ownership in England, enabling first time buyers to purchase a share in a property and pay rent on the part they don’t own.

How does Co-ownership in Northern Ireland work?

You can buy a minimum share of 50% in a property or if you can afford a bigger share, you can buy up to a maximum of 90%. You’ll have a mortgage on the part of the property you own, and you’ll pay rent on the remainder to the Northern Ireland Co-ownership Housing Association (NICHA). The property you want to buy can’t cost more than £165,000.

Who’s it for?

First-time buyers in Northern Ireland age over 18. You can’t own any other property and the property you want to buy can’t be a housing association property.

Advantages of co-ownership in Northern Ireland

• The scheme makes owning a property more affordable for those who wouldn’t be able to buy a home outright.• As you’re only buying part of the property, the amount you’ll have to put down as a deposit is much smaller.

Disadvantages of Co-ownership in Northern Ireland

• You’ll only be eligible for co-ownership if you couldn’t otherwise afford to buy a property without the scheme. • You’re responsible for all repairs in the property.

Borrow from Mum & Dad

If you are fortunate enough to have family who are prepared to provide you with financial help, there are various ways they can support you. For example, they may agree to loan you the money you need for a deposit, or they may act as guarantors or by taking out a mortgage jointly with you. Some mortgages are specifically designed with parental support in mind, enabling spare equity in the parental home to be used as additional security. Parents who agree to become joint owners and who also own their own home must remember that this could lead to a capital gains tax (CGT) liability and incur a stamp duty surcharge on the additional property.

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