Compared to previous years, there are now many ways in which a first time buyer is able to get on to the property ladder and work towards owning their first property. In the past, it was incredibly hard to do and tended to be a very expensive venture because of the risk that were involved for the bank.
Younger people, and first time buyers, now have much more options available to them when they’re looking in to buying their first property now and most of them are very fair and easy to get information on from banks or mortgage brokers.
Rent to Buy
This is one of the newest schemes that has been introduced by the Government with new owners in mind. This only applies to new build homes, where currently there are many in development, and gives new buyers a great head start in the market.
The idea behind this scheme is that you rent a place for a certain percentage less than what would be asked on the market (this is usually around 20% but can be more or less depending on the housing association) and this can last for up to a period of five years. During the five years that you’re paying less for, the idea is that you save up the money that you’re saving on the rent.
At the end of the five year period, you can choose to either pay a cash deposit for a share of the home that you’ve been renting, or you can move in to a new home. The money that you save on the rent should be more than sufficient to cover the deposit that is needed on the home. It also means you have time to settle in before you start paying for a mortgage and gives you time to get the savings ball rolling.
Bridging loans or bridging finance loans are a short term option where you can get quick access to money in order to buy your own place. You can lend high amounts and they’re usually for a maximum term of 12 months, although you can choose an option where you can set a specific date for pay back if you know when you’ll be receiving the money to pay it back.
These are a good option if you know you’ll be coming in to money soon and that you have a way to pay them back. They tend to be processed a lot quicker than a bank does and you have a higher chance of being approved, as long as your credit rating isn’t terrible. Due to the fact that they’re growing in popularity, there are a lot of places opening up where you can inquire about this.
Bridging Loans are very popular in the property market and you can get specialist advice to make sure that you’re making the right choice before you sign any agreements. There are many official places where you can ask for unbiased advice and make sure that you fully understand the agreement that you’re getting in to.
Help to Buy
Another scheme by the Government designed to help people get their foot on the property ladder with more ease than if they were going into it alone. The scheme’s purpose is to make it easier and reduce the costs to encourage more and more people to try and buy their homes and actually own them.
With this scheme, buyers initially only have to find 5% of the deposit of the home. The government will put some money towards this that doesn’t have to be paid back for up to five years. This usually equates to around 20% of the value of the home, meaning that the buyers only need a mortgage for 75%, reducing their monthly costs a lot and making it much more affordable for new buyers than if they had to get 100% mortgage.
The above is referred to as an equity loan and is one of the most popular ones, as it gives people a bit of a helping hand when it comes to payments. They have five years before they have to start paying back the 20% to the Government, giving them time to save and plan.
There’s also the Mortgage Guarantee which still requires a 5% initial deposit, but the buyer will be solely responsible for the overall cost, meaning they will need a 95% mortgage. The difference with this one is that lenders can take out insurance with the government to ensure that they get their money back. This helps new time buyers as it allows for lenders to offer them more without fear of making a loss if the repayments are unfair.
This is a great way for people to get on the property ladder by giving them the option of sharing the home with the housing association or council. You buy certain shares of it, as much as you can afford to do so, and then you pay rent on the shares that the housing association still own.
As time goes on, you’re able to purchase more and more shares as you can afford it and doing it this way can eventually mean that you own the entire home and it’s yours without the need to go through a mortgage, per say.
These are primarily only available for first time buyers, or in some cases, people who have owned a house in the past but are no longer able to afford to do so.
This is a better option for people who are earning a large amount already. It needs a minimum of a shared income of around 60k. Being a first time buyer, no matter how much your income is, can make it difficult to get an unsecured loan from the bank, so being able to do it this way is a definite bonus for people who can definitely afford their own place.
The Government are trying to make it as easy as possible for people to buy their own places now, meaning that more and more options are becoming available with fair terms to help everyone have equal chances to own a piece of land and their own home.