Owning a home has long been a hallmark of financial stability and security. However, for many first-time buyers in the UK, getting onto the property ladder can seem like an insurmountable challenge. Skyrocketing property prices, stringent lending criteria, and hefty deposits can make the dream of homeownership feel out of reach. Fortunately, there are several government-backed schemes and initiatives aimed at helping first-time buyers take that crucial step onto the property ladder. Here, we explore five ways aspiring homeowners can make their dream a reality.

1. Lifetime ISA (LISA):

A Lifetime ISA is a savings account designed specifically to help individuals save for their first home or retirement. With a LISA, savers can deposit up to £4,000 per year, and the government will add a 25% bonus to their contributions. This means savers could receive up to £1,000 in bonuses annually, which can be used towards a deposit on a property priced at £450,000 or less. While there are restrictions on withdrawals, the LISA can be a valuable tool for first-time buyers looking to boost their savings.

2. Shared Ownership:

Shared Ownership schemes enable buyers to purchase a share (usually between 25% and 75%) of a property and pay rent on the remaining portion owned by a housing association. Over time, buyers can gradually increase their share through a process called “staircasing,” ultimately leading to full homeownership. Shared Ownership is particularly beneficial for those struggling to afford the initial deposit and mortgage repayments on a property outright.

There are distinct rules in England, Scotland, Wales, and Northern Ireland. To be eligible in England, your yearly household income must be less than £80,000, or £90,000 in London. Some housing associations and local governments have their own rules on who gets priority and how much money they can afford. The Share to Buy website includes a feature that allows you to search for shared ownership properties. There is a special search engine for Londoners.

3. Rent to Buy:

In England, tenants often have the opportunity to rent a home at a discounted rate of 20% compared to the local market price, aiding them in accumulating funds for a deposit. Eligibility criteria include employment, being a first-time buyer, and the ability to cover rent expenses while concurrently saving for a deposit.

For residents outside of London in England, the shared ownership system can be utilized to locate companies offering rent-to-buy properties. Initially, the tenancy agreement spans up to two years, extendable if additional time is required for deposit savings.

Once tenants have accrued a deposit and secured a mortgage, they can proceed to purchase the property. Notably, the rent-to-buy option is unavailable in Scotland, and in Wales, the rent-to-own program for new landlords has ceased, although some properties may still be procurable. Northern Ireland operates under a separate scheme.

Rentplus, a commercial enterprise, has been spotlighted by The Guardian for its collaboration with local authorities and housing providers, offering “affordable rent-to-buy” solutions to English residents. Tenants under this scheme pay a manageable rent for a duration spanning five to twenty years, concurrently saving towards a deposit.

4. First homes:

If you are a first-time buyer, you may be able to purchase a home for 30-50% less than its market value under this government plan, which is only accessible in England. Unlike shared ownership, there is no need to pay rent.

You can seek new houses in your region advertised by developers or estate agencies participating in the system. Developers sell these at a discount of at least 30% off the market pricing.

5. Help to Buy ISA:

Although the Help to Buy ISA closed to new applicants in November 2019, existing account holders can still benefit from the scheme until November 2029. With a Help to Buy ISA, individuals can save up to £200 per month (plus an initial deposit of up to £1,200) towards their first home. Like the LISA, the government provides a 25% bonus on savings, up to a maximum of £3,000. This bonus can significantly bolster a first-time buyer’s deposit, making homeownership more attainable.

In conclusion, while the prospect of purchasing a first home in the UK may seem daunting, there are numerous schemes and initiatives available to assist aspiring homeowners in achieving their goals. Whether it’s through equity loans, shared ownership, government-backed savings accounts, or discounted properties, these schemes provide valuable support to those navigating the complexities of the property market. By exploring these options and seeking guidance from financial advisors or housing experts, first-time buyers can take significant strides towards making their homeownership dreams a reality.

Author: Jag Chaggar