By Lynda Clark, First Time Buyer Magazine
With the Halifax having just announced that first time buyers in the Capital will need a £100,000 deposit to get onto the housing ladder, many Londoners may be left wondering how they will ever be able to secure their first home. There are, in fact, many different ways that first time buyers might be able to find a way to buy a home of their own for less but they may need to be prepared to think outside the box in order to make it happen.
The First Time Buyer Home Show which is due to be held in Stratford Town Hall in Newham on Saturday 25th March will be highlighting different ways to help aspiring homebuyers in London get onto the ladder for less upfront costs. Here are five fast facts which may help Londoners get onto the property ladder with a lower deposit.
Shared ownership – This is when you buy a percentage of the home from a housing association, which is usually between 25-75% depending on what you can afford. The percentage that is bought is treated like a regular sale where the buyer puts down a deposit and takes out a mortgage on the share they own. You pay a subsidised rent on the part you don’t own to the housing association. After a year you are eligible to buy more shares either purchasing the entire remaining portion or in smaller chunks over several years – this is called staircasing.
Help to Buy – With Help to Buy the Government lends buyers up to 20% of the cost of a new build home outside London and 40% in London (Help to Buy London), known as an equity loan. This means buyers only need a 5% deposit and a 75% loan-to-value mortgage or in London a 55% loan-to-value mortgage. Buyers are not charged interest on the equity loan for the first five years of owning their home.
Help to Buy: ISA – By saving money in a Help to Buy: ISA the Government will boost your savings by 25%. So, for every £200 you save, you will receive a government bonus of £50. The maximum government bonus you can receive is £3,000. Once they receive the Government bonus, it will be added to the money you are putting towards your first home. The bonus cannot be used for the deposit, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.
Newly built homes – Consider the cost difference of old vs new. New builds will be cheaper to run, heat and maintain and will come with a 10 year NHBC warranty that protects against structural defects and some types of damage. On the downside, with many new builds there will be a service charge and if it is an apartment there will be ground rent to pay as well.
Seek mortgage advice – probably the most important of all of these. Until you have found out what you can afford, you won’t be able to work out what or where you can buy. Seek professional advice and find out if you are in a position to buy.
There will be a range of free advice available at the First Time Buyer Home Show. Its free to attend and visitors can register here www.ftbhomeshow.com.