The housing market is not an easy place for first time buyers right now. Average house prices continue to rise, at the same time as mortgages are becoming more expensive and the cost of living crisis is squeezing incomes. However, there is hope on the horizon, as house prices are widely predicted to plateau or even fall during the next few months.
There are also various schemes which are designed to give first time buyers a helping hand. Here’s a look at what’s available.
Lifetime ISA
The basic concept of the Lifetime ISA scheme is simple: save up to £4,000 each year, and receive a government bonus of 25%. That means if you save the maximum amount of £4,000, you will receive a tax-free bonus of £1,000 from the government. The bonus is automatically added to the account each month.
To be eligible, you need to be between the ages of 18 and 39, and a UK resident, or a member of the armed forces serving overseas. It’s limited to one ISA per person, and they are for individuals, not couples or groups. To qualify for the bonus, the ISA must be at least 12 months old.
You can open more than one Lifetime ISA, but not during the same tax year, and you can only pay into one at a time. If the account was opened before your fortieth birthday, you can continue paying into it until your fiftieth. The maximum amount you can save in an ISA is £20,000.
There are some restrictions on how you use the funds to purchase the house. It must be your first and only home where you intend to live full-time, and it must be in the UK. It must also have a value of £450,000 or less and be purchased with a mortgage.
Shared ownership
The shared ownership scheme is designed to help first time buyers purchase a share in a property, and pay rent on the rest. There is a popular opinion that they are reserved for housing association tenants, locals, or keyworkers.
While certain groups might have priority in some areas, shared ownership schemes are open to any first-time buyer with an income of £80k or less, or £90k in London. It’s also open to existing shared owners and those with a current mortgage looking to move, but can’t afford a suitable new home.
You will need to apply for a specialist mortgage, and you will still need a deposit for the share of the property you are purchasing. However, this can be as little as 10-25%, so the amount you need to save is significantly less. You can then ‘staircase’ your share up to 75%, and gradually reduce the rent you pay.
First Homes
This scheme was created in 2021, to offer first time buyers a discount on new-build homes in their local area. The discount is between 30% and 50%, and they require specialist mortgages. However, there are currently only a limited number of eligible homes on the market, and priority is strictly for keyworkers and locals.
If you are looking for a mortgage broker in Abingdon, please get in touch today.
