Saving up a deposit for a house and landing yourself on the property ladder is something that can set you back significantly; with the average deposit required for a house equating to around £20,000 for properties outside of London. And with a younger population eager to get themselves set up for the future early on in life with a house and mortgage, it means sacrificing those big nights out and takeaways to save for that much-needed deposit to reach their goal.
Buying a home is one of the biggest financial commitments you’ll make, so you want to do it the right way and be sure you can afford it. Whether you’re a first-time buyer, second-time buyer, looking for a new build or a second-hand home, there are many options out there to help you buy your dream home (or as close to it as your budget allows).
Homes don’t come cheap and it’s not just the deposit and cost of the mortgage you’ve got to consider. Think stamp duty, fees for solicitors, moving costs, decoration, furniture, appliances and even bills… the list is never-ending. You’ve got to be financially secure and confident that you can cover the costs fully without stretching yourself too far.
You’re probably now crunching figures and having a meltdown at the cost of buying a home, but worry not as this is where the government schemes available to help you buy a home come in.
There are several government schemes available to help you buy a home, these include Help to Buy and Shared Ownership, two of the most commonly used government schemes.
For buyers who are struggling to buy a home on the open market, both Shared Ownership and the Help to Buy equity loan can offer great alternative routes onto the property ladder. However, there’s often confusion about the two schemes and how they differ from one another.
What is the Help to Buy: Equity Loan scheme?
Help to Buy is a government-backed scheme, and the Help to Buy equity loan enables purchasers to buy a new-build home with the help of an equity loan, also known as shared equity. The government provides a loan of up to 20% of the home (or 40% in Greater London), so the purchaser only needs to raise a 5% deposit, with a 75% mortgage (or 55% in Greater London) making up the rest.
There are a few people that this scheme is available to, including first time buyers, those who have previously sold a home, or those who will have sold their current property before or at the point of completion on their Help to Buy home.
This scheme is only available on new build homes, and you cannot buy a property that is on the market for more than £600,000.
For a Help to Buy home, the deposit will be at least 5% of the full value of the home – for example, a 5% deposit of a home costing £500,000 would be £25,000. However, as the equity loan counts towards your deposit, you may be able to take out a mortgage where you might otherwise struggle; this also means that you don’t have to take out a costly 95% mortgage.
When it comes to repaying your loan, you need to remember that it is interest-free for five years – during this time, you are only required to pay your mortgage and a monthly management charge of £1. After the initial five years, the purchaser will pay an annual fee of 1.75% on the amount of the outstanding loan; this fee will increase each year with inflation.
What is the Help to Buy: Shared Ownership scheme?
The Help to Buy: Shared Ownership scheme allows buyers to purchase a share of a home – usually between 25% and 75%. Purchasers will pay a mortgage on the share that they own, and a below-market-value rent on the remainder to a housing association.
This scheme is available to first-time buyers, and those who are in the process of selling, or have previously owned a home but have since sold. To be eligible for Shared Ownership, your maximum household income must not exceed £80,000 per annum or £90,000 in London.
Unlike the Help to Buy: Equity Loan scheme, the Shared Ownership scheme is available on purpose-built homes – these will either be new build or resale properties that are being sold by the current shared owners.
The deposit for a Shared Ownership home is at least 5% of the share that you are buying, not on the full value of the property. So, if a property costs £500,000 and you purchase a 25% share – equating to £125,000 – a 5% deposit on your share would be £6,250.
A mortgage will be paid on the share you own, with a subsidised rent on the remainder being paid to the relevant housing association, along with any service charges and ground rent. If you choose to increase your owned shares (also known as ‘staircasing’), your monthly mortgage payments will increase and your rent will decrease, up until the stage where you own 100% of your property. At this time, you will only pay your mortgage.
To find out more information on the Help to Buy schemes, visit your local development sites or head to www.helptobuy.co.uk
The Government Help to Buy schemes are allowing more people to land themselves a spot on the property ladder than ever before and new build homes are becoming an increasingly popular choice as they are a great option whether you’re a first-time buyer, have a growing family or “right-sizing” in later years.
According to data from the Ministry of Housing, in 2019, the number of new homes created in England hit it’s highest level in almost 30 years with around 240,000 properties being added to the housing stock during 2018/19.
But what are the benefits of buying a new home?
One of the main benefits of buying a new-build property is that, initially at least, it’s less likely to require the same level of maintenance that you’d face with an older property. Your energy bills may well be cheaper, too, given that they are usually better insulated than period homes.
And if you’re buying off-plan (i.e. before it’s actually been built), you may also be able to choose certain aspects of the design.
One of the great advantages of buying a brand-new property is that, often, many of the fixtures and fittings you’d otherwise have to fork out for are included in the price. Exactly what’s included varies depending on the developer and what they are offering. You may (though not always) get washing machines or dishwashers thrown in, as well as wooden flooring or carpet.
New build homes are built to much higher standards and with ever-rising energy costs, energy efficiency is an important aspect to consider when buying a new home. They have to comply with the latest building regulations. This means that new build homes are far more energy-efficient than older properties. Data from Energy Performance Certificates shows over 80% of new homes have the highest A or B ratings. That compares to just 2.2% of existing properties.
Another benefit of buying a new build home is that it will come with a 10-year NHBC warranty covering structural defects. Most developers also provide their own two-year warranty. This means that if you have any problems it will be easily sorted out by the developer rather than you having to fork out thousands due to a mould ridden wall the seller in a second-hand home didn’t tell you about.
The process of buying a new home is often quite smooth due to there being no upward chain to contend with when you buy a new-build home, which means you won’t be stuck waiting for someone to sell a property before you can move in.
One important thing to look out for when buying a new build home is whether it is a freehold or leasehold site. Ideally, you want to be investing in a property that is freehold due to the restrictions and problems leasehold properties can cause later down the line, for example, if you want to add an extension onto your property you’ll need to get the approval from the freehold owner.
When you buy a freehold property, you become the sole owner of both the building and the land it stands on and you won’t need to pay ground rent, service charges or permission fees, but you will be responsible for the maintenance of the building.
Leaseholders have to get permission from the freeholder to make certain alterations to the property. They will also have to pay rent each year – known as ‘ground rent’ – and will often have to pay an annual fee to a managing agent.
And of course, Help to Buy equity loans are exclusively available on new-build properties meaning you could be in a new home in no time.
The new homes market in the UK is growing rapidly and here in Plymouth, we are surrounded by new developments popping up constantly.
Located on the outskirts of Britain’s ocean city, Sherford is the most notable development in the area. The land which occupies 1,200 acres of land will see 5,500 homes built by some of the UK’s most well-known developers including Taylor Wimpey, Bovis Homes and Linden Homes.
Since house construction began in 2016, Sherford has become home to over 150 residents with the community expanding rapidly as new residents move in every week, community facilities are also well underway with Sherford Primary School now open as well as the Skills Training Centre.
Saltram Meadows in Plymstock is also a popular new development site with a wide range of 2, 3 and 4 bedroom homes on offer set in an idyllic location next to Saltram Estate. The development run by Persimmon Homes is now in phase 4 of construction and is continually growing.
Also run by Persimmon Homes, Palmerston Heights located in the North of Plymouth is in phase 3 of its development. The site has a collection of two, three and four-bedroom homes on offer. Palmerston Heights is well-placed to benefit from the council’s vision of a ‘New Derriford’. There’ll be new employment opportunities, a district shopping centre and the Forder Valley link road, providing residents with direct access to the A38 Devon Expressway.
Hartley Gardens situated in Mannamead, Plymouth is completing its first phase of development with a stunning range of 1 and 2 bedroom apartments for sale as well as 3, 4 and 5 bedroom homes on offer.
Each of these development offers the opportunity for you to start the next chapter of your life with a new home, in a new community and with the Help to Buy: equity loan scheme on offer at each development site you are lost for choice.
If buying a home, new or old in 2020 is something you’re considering then remember to assess all of the possibilities and whether it’s a financially viable option for you. Take advantage of the schemes available to you and ensure you are making the right choice for you.