Help for First-Time Home Buyers

18th January 2019

How does the Government help first-time buyers?

Recent research has shown that it can take a first-time buyer without any help an average of 18 years to save the down payment on their first property. In reality many first-time buyers get help from their parents or through luck or goodwill they acquire the funds to purchase their house.

However there are several government schemes available to help first-time buyers.

Help-to-Buy Isa

Since December 2015, first-time buyers in the UK have been able to save in a Help-to-Buy Individual Savings Account (Isa).

Under the scheme, savers receive a 25% bonus from the government when they withdraw the money they have saved to buy their first property. The maximum purchase price is £250,000, or £450,000 in London.

The maximum government bonus someone can receive is £3,000, if they have saved £12,000.

Savers can deposit up to £200 a month, although they can kick-start saving with a lump sum of £1,200. There is more information here: https://www.moneysavingexpert.com/savings/lifetime-isas/

The most recent figures show that the Isa scheme has supported nearly 170,000 property completions between December 2015 and June 2018.

Help-to-Buy Isas are on the way out, due to the fact they won’t be available to new savers after November 2019, and to the introduction of the Lifetime Isa.

Help-to-Buy loans

The government lends up to 20% of the cost of a newly built property – or 40% within Greater London – so buyers need only a 5% deposit and a 75% mortgage to buy it.

Those purchasing a new-build home aren’t charged interest for the first five years, either.

According to the latest figures from the Ministry of Housing, Communities & Local Government (MHCLG), the government has provided £9.9bn of Help- to-Buy equity loans since April 2013.

The official data shows that 183,947 properties have been bought with these loans in England. First-time buyers have accounted for 81% of total purchases.

Shared ownership

The shared-ownership scheme is a cross between buying and renting.

It lets borrowers purchase between 25% and 75% of a property, and pay rent for the remaining bit.

The homes on offer are usually new-builds or those being resold by housing associations in England.

Over time, occupiers can “staircase” – buy a bigger share of the property when they can afford to – until they own 100% of it.

In England, the eligibility criteria are that the purchaser is a first-time buyer, or someone who used to own but can’t afford to now. Annual household incomes need to be below £80,000, or £90,000 in London.

The Council of Mortgage Lenders has estimated that 200,000 UK households live in shared-ownership properties.

In 2017, the chancellor announced that stamp duty – the tax applied when people buy properties above a certain value – would be scrapped for most first-time buyers. That was extended to include shared-ownership schemes in 2018.

HM Revenue and Customs says that more than 180,500 buyers have used the tax relief so far.

There are several criticisms of shared ownership, including the fact that until you own 100% of the property, you’re treated as a tenant in law, which could mean you lose your property if you don’t keep up the rental payments.

People also normally have to pay a maintenance or service charge on the whole value of the property – and buying a larger share can be expensive.

Starter homes

The government announced the starter-homes initiative in 2014. It said it would build homes to be sold at a discount of 20% to first-time buyers between the ages of 23 and 40.

Eligible buyers would need a combined household income of less than £90,000 in London, or £80,000 in the rest of England.

The starter homes will generally be built on brownfield sites – land previously used for commercial or industrial purposes – although construction hasn’t begun yet and the government are working with the building industry on the next steps to move forward with development.

If you are a first-time buyer and need to find a solicitor who will support you through the process of buying your first home please contact us on 0191 4555361.

If you would like a quote please complete our online form https://www.hannayslaw.co.uk/services/conveyancing.html