Ways to get onto the property ladder

Getting onto the property ladder certainly isn’t an easy feat in recent years, however, there are multiple schemes to help you achieve this. There are 2 things to immediately think about when wanting to buy a property.

Schemes

Shared Ownership Scheme – The Shared Ownership Scheme is designed to help you own a portion of your home when you can afford it. When you buy a home through a shared ownership scheme you buy a share of the property and pay rent on the rest. The share you can buy is usually between 25% and 75%. You can buy a 10% share on some homes.

Shared ownership properties are always leasehold properties, which means that you only own the property for a fixed period of time. You can buy more of your home after you become the owner, this is known as ‘staircasing’. You can buy shares of 5% or more at any time.

To buy a shared ownership home, you need to register with a Help to Buy agent in the area where you want to live. You also need to meet the following criteria:

One of the following criteria must also be true:

Help to Buy ISA – A Help to Buy ISA was a scheme designed by the government to help people get onto the property ladder and own their own homes. These accounts can be opened with a minimum of £1 and a maximum of £1000. With a Help to Buy ISA, you can save a maximum of £2,400 a year (excluding interest) and the government will top up your savings by 25% (up to £3,000) when you buy your first home.

The Help to Buy ISA closed to new accounts at midnight on 30 November 2019. For those who already opened a Help to Buy ISA (or did so before 30 November 2019), they will be able to continue saving into your account until November 2029 and to claim their 25% government bonus by November 2030. It is worth noting that if you are buying with someone who also has a Help to Buy ISA, both of you will get the 25% bonus.

Lender schemes – A lender scheme is exactly what it says, rather than the government creating a scheme to help you get on the property ladder, the lenders (typically banks) have schemes to help you get your first home.

Lloyds Bank: Lend a Hand – Lloyds Bank Lend a Hand mortgage is available to first-time buyers with a deposit of at least 5% who have a friend or family member – known as a ‘Helper’ – willing to put up savings of a further 20% of the property value. Combined, the buyer and helper need to have 25% of the asking price, therefore if the buyer can afford an 8% deposit, the helper must put in 17%. The Helper, is required to hold their savings with Lloyds for 42 months, they will still earn interest on their savings at a fixed rate annual interest rate (AER) of 2.70% but will not be allowed access to their cash during that time.

Barclays: Family Springboard Mortgage – Like Lend a Hand, the Family Springboard mortgage allows a first-time buyer’s relatives to leverage their savings to help them buy a home. While the first timer will need the same minimum deposit of 5%, the relative will only need to provide a further 10% of the purchase price which will be paid into the bank’s Helpful Start account. This pays interest of base rate plus 1.50% which will be fixed for three years. After that time, the saver will be their money back with interest – so long as the buyer has kept up with their mortgage repayments.

Yorkshire Building Society: Offset Plus deal – Yorkshire Building Society enables first-time buyers’ family and friends to help them get on to the property ladder, but under this arrangement they will retain access to it via an offset mortgage.  A regular offset mortgage works when the buyer puts their savings in a linked account with the bank. This cash is then offset against the debt of their mortgage. But with this deal, the helper will link their savings to your mortgage instead of you. Their cash will be kept in a linked account (which will be in their name) which they can access when they want to. The benefit to the homeowner will increase and reduce in line with the savings balance.

5% Deposits – While the most competitive mortgage interest rates are reserved for borrowers with deposits of at least 40%, there are still some banks and building societies willing to lend up to 95% of a property’s value – even without the help of friends or family, meaning the buyer will only have to pay a 5% deposit on their home. The upside to these mainstream deals is that there is no government contribution to pay back, and you don’t need to find a friend or family member with the cash to back your application. The downside, however, is that the interest rates charged on 95% mortgage deals will be considerably higher than on the schemes like the above, which can result in hundreds of pounds extra a month on your mortgage repayments.

Lifetime Savings ISA – A Lifetime ISA (LISA) is a scheme designed by the government to help people aged 18-39 buy their first home or save for retirement. In this account, you can save up to £4,000 a year (excluding interest), and the government adds a bonus of 25% of what you have saved in the financial year on top (maximum bonus of up to £1,000 a year). With this account, you can keep saving up to £5000 a year until you are 50. When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open, and your savings will still earn interest or investment returns.

You can withdraw your money from a LISA, however, unless withdrawing for retirement or buying your first home there is a withdrawal fee of 25% of the total you have withdrawn. You can transfer money from a Help to Buy ISA to a LISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA you’ll have to pay the 25% withdrawal charge. It is worth noting that if the person you are buying with has a Lifetime ISA, they can use their savings and government bonus too.

Buy council property – If you live in council owned (rented) accommodation, you may be able to buy your home through the Right to Buy scheme.

This can get you can get a discount on the market value of your home when you buy it if you qualify for Right to Buy. The maximum discount is £84,600 across England, except in London boroughs where it is £112,800.  You can use the Right to Buy Calculator to see what discount you could be entitled to. It should be noted that, if you sell your ex-council owned home within five years of buying it, you will have to repay most (if not, all) of the discount you received.

The amount of discount you could be eligible for is dependent on specific factors.

There are different discount levels for houses and flats.

If you are buying a house, you get a 35% discount if you have been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 1% for every extra year you have been a public sector tenant, up to a maximum of 70% or £84,600 across England and £112,800 in London boroughs (whichever is lower).

If you are buying a flat, you get a 50% discount if you have been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up by 2% for each extra year you have been a public sector tenant, up to a maximum of 70% or £84,600 across England and £112,800 in London boroughs (whichever is lower).

If you’re looking to buy, sell or remortgage a property, visit Residential Conveyancing for your free, no-obligation conveyancing quote, or simply call 023 8023 4433 to get started.

Disclaimer: Information on this webpage is not intended for legal purposes or advice. If you require legal advice or services you should seek a professional legal practitioner.