As we like to mention in many of our blogs, Surrey has so much to offer people looking to move into the county. There are so many events, unique attractions and things to do as well as the perfect combination of countryside and city living. While there may also be a reputation for high-value properties and difficulty getting on the property ladder in Surrey, there is actually a vast range of homes available at different price points.
However, if you’re still looking for extra support and guidance throughout the process, you may be able to make use of some schemes for first-time buyers. Put in place to make the process a little easier – they offer different ways of saving and benefiting from government bonuses or reduced mortgage rates. The ones that may work for you will depend on your situation and preferences at the time of buying, so this article is going to give you some more information about what’s on offer. This way you can be more informed as to how you can get onto the property ladder in Surrey (or anywhere else for that matter!)
What Are Schemes For First-Time Buyers?
we spoke with Joe Leonard and Ben Conquer from Seymours in Ripley, Joe said. “It is, unfortunately becoming increasingly difficult for people to get on the property ladder and reach the milestone of buying their first home. There are many reasons surrounding this, such as wages, inflation, personal circumstances, recessions and local property markets. It has been recorded that across the whole country, the average age of people achieving this milestone is around 33 years old. This goes up to around 35 years in London. While this may seem surprising – it should not leave you disheartened”.
Ben went on to say, “there are plenty of individuals and families around the UK and in Surrey that have been able to make their first purchase even in their 20’s thanks to the help of professional estate agents and amazing schemes for first-time buyers. They set out to offer bonuses to people who save a certain amount of money each year in ISAs and government saving accounts. Alternatively, some offer a means of discounted mortgage rates and the opportunity to own percentages of your home while you find the extra income to cover the rest,” he said.
There are a few options available and some may sound quite similar, so let’s start by looking at the help to buy offers.
Help To Buy: Equity Loan
This is becoming an extremely popular way of getting yourself onto the property ladder in Surrey. The main goal is to allow people to purchase a home with a smaller deposit. As a result, you could be looking at significantly reducing the time it takes to save up for the big move.
This is made possible by the availability of up to 20% of the cost of a new build home provided by the government. (This goes up to 40% in London!)
Along with your minimum deposit of 5%, you could be looking at reduced mortgage rates due to the large deposit of up to 25%.
Another benefit of this is that the equity loan itself is interest-free for the first 5 years. When you begin to pay this in the 6th year, it will be based upon the full amount you borrowed.
Firstly, you must be aware that the original loan is based upon the market value of your home at the date of purchase. As you repay this amount, it will be relative to the current market value at the date of repayment.
This means you could end up paying back more than you borrowed in the first place if the value of your home rises. Although, this is still the case if the value falls too! In this case, you would pay back a smaller amount.
Because of this, it is important to be certain you are able to keep up with repayments and be able to pay the loan in full if you haven’t already:
- At the end of the loan term
- When you have paid your mortgage
- When you sell the property
Help To Buy: Mortgage Guarantee
As a result of the pandemic, many families have had to dip into their hard-earned savings simply to pay for essentials and other costs. This means taking a few steps backwards in the mission for a 10% or 20% house deposit.
In April 2021, the government recognised this setback and introduced the mortgage guarantee as a scheme for first-time buyers.
It allows people with a 5% deposit to be approved for a mortgage more easily as the lender will have a guarantee they are able to keep up the repayments.
In the event of repossession or critical financial hit from the buyer – the lender will receive compensation for a proportion of the losses. While there is still a level of risk involved from the lender’s point of view, it does make home buying much more of a possibility for credit-worthy individuals who have suffered a financial hit recently.
But it is not just help to buy schemes that you have to choose from. You can also benefit from extra savings to get you closer to that all-important deposit.
Lifetime ISA (LISA)
This is simply a form of individual savings account, purely set up to help towards the purchase of your first home or retirement fund. The money you save cannot be used for anything other than these two options – but the major advantage is that the government will be providing financial bonuses for every pound you save!
Each month, you will receive 25% of your savings as an extra bonus. So if you happen to save £1000 in January, you will see another £250 on top of that! You don’t even need to do anything…
Because of these bonuses, the LISA is thought to be one of the more long term schemes for first-time buyers. This way you can benefit as much as possible from the government contributions.
Even if you decide to use the money to buy your first home in Surrey, you can continue to save until you reach 50. You will continue to receive the bonus each month and you’ll be able to access the funds again when you turn 60 years old. Your savings growth will always remain tax-free.
- Firstly, if you’re buying a home as a couple or with another person – you can use both or all LISAs when you purchase the property. This means you will benefit from everybody’s bonuses.
- You can only save up to £4000 each tax year.
- You will only receive a yearly bonus of up to £1000.
- The amount you save in a LISA will contribute to your total annual ISA allowance.
- Your first home must cost less than £450k to be eligible to use savings from your LISA
- You cannot use this money on a property you wish to rent out. You must be planning to live in it.
The concept of shared ownership is not what you may think on first hearing about it. The scheme is designed to create an opportunity for people who cannot afford the open market value of a property.
Instead, you can purchase a percentage whilst paying rent on the shares remaining (usually to a housing association or the council.)
It does not mean you will be sharing your living space with other people!
The advantage of this is that you will of course only pay a mortgage on the percentage of the home you own. So, for those who are looking for a lower deposit and reduced mortgage rates – this could be the way forward.
Because the overall value you are paying is less – you will need a much smaller deposit. You can really hold back some of your savings by doing this and decide later on to buy extra shares until you own 100% of the property!
It’s a great way of getting on the property ladder in Surrey but giving yourself more time to become financially stable before taking on a full mortgage. So if you think this is the option for you, get in touch with our team today to find some beautiful shared ownership properties in the local area!
Seymours Can Help You Buy Your First Home In Surrey Today
We know the figures at the start may have scared you a little. But hopefully, now you know what help and support are available to you – it will be a much nicer (and perhaps quicker) journey to homeownership.
From government loans to extra savings and reduced mortgage rates: there is something out there for every situation and circumstance.
Make sure you research each option carefully before deciding what’s right for you. As much as we love the county and helping people find their dream homes, it has to be on your own terms.
So when you’re ready to make the leap – get in touch! You can fill out a contact form today or visit our website to book an appointment and find out more. We keep our processes simple and transparent and won’t try to baffle you with small print or jargon.
Ben Conquer & Joe Leonard are the resident partners of Seymours in Ripley, which first opened its doors 30 years ago. You can get it touch with either of them on 01483 211644 or click here.