What help is there for First Time Buyers, now Help to Buy has finished? (Part 1)
You may already know from our previous article ‘Help to buy is ending, when do I need to apply?’ that help to buy is coming to an end. The deadline for new applications was the 31st October 2022 and help to buy purchases must legally complete by 31st March 2023. With this in mind, we’ve been inundated with questions related to alternative first-time buyer schemes.
So, what support is out there for first time buyers?
Like Help to Buy, shared ownership is a government backed scheme that enables buyers to buy a percentage share of a property. However with Shared Ownership, you also pay rent on the share retained by the housing association.
The minimum share purchased can be as little as 10% of the market value of the property and the rent paid on the other share is often charged below open-market value, normally at 2.75% of the property value per annum.
Your deposit could be as little as 5% of your share – for example if you were to buy a 25% share of a property worth £200,000, a 5% deposit would equate to £2,500, a great way to get on the ladder if your deposit size is holding you back. You will also have the option to increase your share of the property as time goes on – this is referred to as ‘staircasing’.
First Homes Scheme
This scheme was launched in June 2021. If you’re a first-time buyer, you may be able to buy a home for 30% to 50% less than its market value. The scheme has been labelled as a hybrid between help to buy & shared ownership – as it potentially allows people to buy a bigger property than they may have been able to afford with a mainstream mortgage, without the requirement to pay rent on the share they do not own.
The property must be a new build and cannot cost more than £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied. You can only sell the property to someone who is eligible to buy a First Home and you must give them the same percentage discount that you got, based on the home’s market value at the time of sale.
As this is a relatively new scheme, there are not many new build developers offering them just yet. But, now that Help to Buy is finished, we’re hoping to see it become more popular – so watch this space.
As well as specific schemes to help you buy a home, there are also government incentives to help you save towards one, as this is normally the biggest hurdle to overcome.
A Lifetime ISA will allow you to save up to £4,000 a year (you must make your first payment by age 40) The government will then add a 25% bonus to your savings (up to a maximum of £1,000 per year) This money will either need to be used for buying a home or to fund retirement. When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns.
Stamp Duty Land Tax
It’s also worth remembering that special rates for stamp duty apply, especially for First Time Buyers, until March 2025. We covered this in detail recently in our article: Stamp Duty – what’s the latest?
So, even though help to buy is no longer available for new applicants, there are still a number of ways and support in place to help get you on the property ladder. The schemes above may have additional criteria that will need to be discussed with your adviser. If you’re considering buying your first home, please get in touch to talk through your options.
If this has got you thinking, we’d be delighted to help. Get in touch and we’ll be help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
Sam Mason – 12th January 2023