Purchasing a house is one of the most expensive investments you will ever make so it is important to consider everything, including schemes that are designed to aid you and how the current property market in 2021 is looking.
After the third (and hopefully last) lockdown in the UK, the housing market has become a friendlier place for first-time buyers. Although the overall house prices are expected to rise by 4% this year, the recent extension of no stamp duty and 95% mortgages have made jumping on the housing ladder a bit more affordable. As well as this, there are three government-backed schemes, all in a bid to try and encourage you to take that step and become a homeowner this year.
“For too many people, no matter how hard they work, home ownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.” “Together we can turn ‘Generation Rent’ into ‘Generation Buy’.”
-The Housing Secretary Rt Hon Robert Jenrick MP
Figures show there was an increase of 40% of mortgage approvals in January 2021 compared to January 2020 because of the stamp duty holiday.
The government plan to keep the no stamp duty valid until 20th June 2021. No stamp duty means that buyers could save up to £15,000 in tax if they decide to move before the deadline and up to the house price of £500,000. If your house price exceeds this, you will have to pay stamp duty.
95% Mortgages has recently launched on the 19th April 2021 and will be running till the end of 2022. This scheme means you can apply for a mortgage with a 5% deposit as opposed to 10% for credit-worthy buyers. Saving for a deposit on a house is usually the most challenging part, as it is such a big sum of money to put down and can take years to save up the right amount. By allowing buyers to put down half of the original deposit means less time is wasted on saving up the money and more people, especially the younger generation, will be able to afford it.
“This scheme will help support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents to tradespeople, DIY stores and removal firms.” – Gov.uk
Help to Buy equity loan 2021-2023 is a low-interest loan supporting first-time buyers towards their deposit. The scheme requires you to put down a 5% deposit with the government lending you up to 20% and then you need a mortgage of up to 75% to cover the rest. These percentages are higher in London. To be eligible for this, the house you are looking to buy needs to be a new-build and have a purchase price of up to £600,000, it also needs to be the only home you own and not be sub-let or rented out after you buy it.
You must have all the equity loan paid off after 25 years or before this if you decide to sell. You can have the equity loan free of charge for up until 5 years, in the 6th year, your agent will help you set up monthly instalments to pay it back. There will be interest rates added onto your loan after the 5th year which you will also need to pay off. However, there is no reason why you cannot pay back the loan before the 5 years, just take into account the minimum repayment is 10% of the market value of your home at the time of payment.
Shared ownership means that you own a share of the property and then pay rent on the share you don’t own to a housing association. Shared ownership does not mean that you have to live with the person with who you are sharing the ownership with. There is also no restriction to the number of bedrooms within the house or the size of the house however, the properties available on this scheme are only if they have been built with the sole purpose to be shared ownership by a housing association using Government subsidy. Your household needs to be earning £80,000 per year or less to be able to apply for shared ownership.
There are many benefits of shared ownership if you cannot afford to buy a home outright. The rent is cheaper than the average rent on the open market, your deposit can be 5-10% of the share, not of the entire value of the property and you can begin with a minimum of 25% share however, this can be increased up to 100% if and when you want to.
First Homes is a new scheme designed to help local first-time buyers and key workers onto the property ladder. For many young people, it can feel like a mission impossible to find a home they can afford in their local community with the house prices ever increasing. Some key workers also find themselves having to commute long distances as they cannot find affordable housing close to their jobs.
The government aims to build thousands of new First Homes within communities and offer them at a discounted price of 30% compared to the current market price. First Homes are to be bought with the sole purpose of living in, meaning you cannot use the house as an investment opportunity.
If you are struggling to get onto the property ladder and you are eligible for one of these schemes, they are worth enquiring about especially if you are a first-time buyer. For more information head to www.gov.uk and browse the government-backed schemes for home buying. Or, speak to a mortgage broker for tailored advice.
New builds are a great option for first-time buyers as there is no need to pay for any renovation works or maintenance as they are usually finished to a nice standard, ready to move in. They also come with a 10-year NHBC warranty covering structural defects. Another benefit of buying a new-build is the transition of buying the house is very smooth due to there being no upward chain.
Leasehold and Freehold. It is important to know whether the property you are interested in is a leasehold or a freehold. Leasehold means you own the building but not the land and freehold means you own the building and the land. As standard, flats are usually leasehold and houses are usually freehold, however, always make sure to check because new-builds are increasingly becoming leasehold.
Leasehold properties come with quite a few added fees that are worth taking into account. You will have to pay an annual ground rent fee to the landlord as well as service charges. Ground rent has been seen to increase rapidly over time and expensive fees have been demanded for minor alterations. Depending on the landlord’s decision, you may not be allowed to have pets or to sub-let them.
Before purchasing, find out how many more years are left on the lease as most mortgage lenders will require no less than 80 years remaining. When you are buying, always have ‘selling it’, in the back of your mind as it can be difficult to sell if the lease has less than 70-80 years left and the property value will drop.Freehold properties are free of additional charges as you own the land as well as the building.
Before the 20th of June 2021, is the ideal time to buy a house with zero-stamp duty and 95% mortgages. The demand for housing is high meaning the house prices are on the up, so if you are thinking about buying but are slightly hesitant, the best time is right now. With the aid of government-backed schemes, it can be more affordable than you might think to jump on the property market.