Demand for property online soared line as the property market re-opened in June. Google searches (google trends) for ‘first-time buyers’ increased by 47% compared to last year as buyers interest reignited after the period of lockdown. The property portal Rightmove also reported similar surges and, when questioned, 28% of buyers had no previous plans to move showing how lockdown has made many of us considered exactly what we now need from our homes.
Fortunately, there are several routes onto the property ladder, both for first-time buyers and second steppers looking to upsize. Below is a quick summary of what you need to know:
Help to Buy – quick to get onto the property ladder
Buyers will need a 25% deposit, which is made up of 5% of their own funds and 20% coming from a government loan. This means a mortgage only needs to be secured for the remaining 75% of the property’s value. Help to Buy loans are interest-free for the first five years.
- Deposits are low
- Interest-free borrowing for five years
- Buy a home quickly
- Limited to specific new-builds Help to Buy properties only
- The loan becomes more expensive over time
- Can’t buy a home for more than £600,000
Shared Ownership is Helpful if You Have a Small Deposit
Shared Ownership gives first-time buyers and those that do not currently own a home the opportunity to purchase a share in a property.
The buyer secures a mortgage on the share they own, usually between 25% and 75% of the total value, and pays rent to a housing association on the remaining share. Because buyers only need a mortgage for the share they are purchasing, deposits are usually a lot lower compared to the amount that would be required when purchasing outright.
You then have the option to purchase more shares in your home at a later stage through a process called ‘staircasing’, until you own 100% of the property.
- Mortgages are more accessible, even if you are on a lower income
- The share of the home that you own will grow in value
- Lower deposits
- You are responsible for 100% of the ground rent and service charges on your property regardless of how low your share is
- Not all lenders offer Shared Ownership mortgages
- There will be restrictions on home improvements
A Lifetime ISA Is Great if You’re Already Saving For a Home
A Lifetime ISA (Individual Savings Account) is a longer-term tax-free savings account that gives you a government bonus of 25% of the money you put it. You can save up to £4,000 a year with the government adding up to a further to £1,000 . If you’re already saving for your first property, it makes sense to transfer your funds into this type of account to benefit from the additional bonus.
- 25% bonus on your savings
- Grow your funds quickly to buy a home faster
- You can top up your account annually or monthly
- You won’t pay interest, income or capital gains tax from investments held within a Lifetime ISA
- Can’t buy a home for more than £450,000
- Those with an inherited property are not eligible
- An account must be active for 12 months before the bonus kicks in
If you are considering buying and would like to find out more about the available schemes or about the properties for sale we have in Surrey, please contact one of our local branches today.