What help is available when buying your first home?

Buying your first home can sometimes seem like an impossible dream. But there are a number of schemes designed to help first-time buyers.

Many of the schemes are run or backed by the government but some are run by banks, building societies, councils, housing associations or builders.

We have put together a list of the most useful sources of help achieve your first time buyer house of dreams:

1. Help to Buy
2. Forces Help to Buy
3. Help to Buy ISA
4. Shared Ownership
5. Right to Buy
6. Right to Acquire
7. Discounted Sales
8. First-time buyer mortgages
9. First-time buyer packages

1. Help to Buy

If you are struggling to raise the money to buy a new home, the Help to Buy scheme could do just that – help you to buy.

You could borrow up to 20 per cent (40 per cent in London) of the cost of a new home interest-free from the government. You would then only need a 5 per cent cash deposit and a 75 per cent mortgage to make up the rest.

The scheme is only available for newly-built homes that you buy direct from the builder. And the home must cost less than £600,000.

The interest-free period on your government loan only lasts for five years and after that the interest rate goes up every year. But those first five interest-free years can make a big difference to your sums when you are deciding what you can afford.

And having a Help to Buy loan can make it easier to find a mortgage to cover the rest of the purchase price and help to get you a better deal on interest rates.

But Help to Buy does have ‘downsides’ as well as benefits.

2. Forces Help to Buy

If you are a regular serviceman or servicewoman in the armed forces, the Forces Help to Buy scheme could let you borrow up to 50 per cent of your salary to a maximum of £25,000, interest free.

Several websites (including some run by the government!) say the scheme ended in 2018, but it has actually been extended to December 2019.

You can apply for the loan (suggest we insert a link if we can) online through the Joint Personnel Administration system and can get help through your chain of command or personnel agency.

3. Help to Buy ISA

If you are a first-time buyer, you can save up to £200 a month towards your first home with a Help to Buy ISA and the government will boost your savings by 25 per cent – that is a £50 ‘bonus’ for every £200 you save.

There is a limit of £3,000 on the bonus you can get but, if you are buying with a spouse or partner, you can both open a Help to Buy ISA so you could get £6,000 in total.

The Help to Buy ISA is available from a number of banks, building societies and credit unions.

When you are close to buying your first home, you need to ask your solicitor or conveyancer to apply for your government bonus which will then be added to the money you are putting towards your first home.

The Help to Buy ISA scheme closes on 30 November 2019 – so if you want to open a new account you need to do it before then. However, you can still claim the government bonus and carry on saving in a Help to Buy ISA until 2030.

4. Shared Ownership

If you cannot afford to buy a whole house, why not buy part of one and rent the rest of it until you can afford to buy it?

That is the basic idea behind the government’s Shared Ownership scheme.

Unfortunately, there are not many homes on the market that offer Shared Ownership so you may not find your ideal house in your ideal location with this option – but it has to be worth taking a look.

Of course, there are ‘pros and cons’ to Shared Ownership.

5. Right to Buy

If you are a council tenant, the Right to Buy scheme could help you buy the home you rent with a discount of up to £78,600 (£104,900 in London).

So, if you like where you live but would rather own it than rent it, talk to your council.

6. Right to Acquire

The Right to Acquire is pretty similar to the Right to Buy but is aimed at housing association tenants rather than council tenants.

If you rent your home from a housing association, you could be eligible to buy it at a discount which will mean you pay between £9,000 and £16,000 less than its actual value. The amount of discount you will get depends on where you live.

7. Discounted Sales

When councils and housing associations build new homes for sale, they sometimes offer some of them at prices that are as much as 50 per cent less than their real market value. The scheme is known as Discounted Sale.

Councils and housing associations who run this scheme set their own rules for Discounted Sale, but you must usually have a local connection to the area if you want to use the scheme.

There are very few homes offered under the scheme, but it is worth asking the local council in the area you where you want to buy a home if there are any Discounted Sales opportunities. The council should be able to tell you not only about any homes it is building itself but also about homes being built by housing associations.

8. First-time buyer mortgages

A number of banks and building societies offer mortgages tailored to the needs of first-time buyers. It can be possible to borrow the money you need with very little deposit, but it usually comes with a high price in interest rates.

Or you could look at things such as ‘guarantor’ mortgages where someone else (often mum and dad!) guarantees that the mortgage bills will be paid if, for any reason, you find yourself struggling to pay. There are many variations on this basic theme but in general they all give the option of buying with a small deposit and a relatively low interest rate because the lender – the bank or building society – sees this as ‘low risk’. It is certain to get its money back.

9. First-time buyer packages

If you are moving from fully-furnished rented accommodation into your first new home, you are going to have to buy things such as furniture, kitchen appliances, carpets, a TV – and more. This can all mount up to a pretty big sum that you have to find at a time when your finances are already under pressure.

Many house builders offer ‘first-time buyer packages’ to ease the strain by bundling a lot of these expenses into the cost of your new home.

Even if the builder of the new home you want to buy is not advertising one of these deals it is well worth asking if it can help.

Sadly, if you buy a second-hand home, you are not likely to be able to do anything similar.

All of these schemes can help you take the first step onto the housing ladder. For most people, in most circumstances, we reckon the Help to Buy scheme is hard to beat.

But you should check out the ‘small print’ to be sure it is right for you.

Note that some of these schemes – particularly the government-backed ones – are only available in England. Other nations within the UK have their own schemes with their own rules. And some of the schemes have strict rules about who is eligible and who is not.

Quite often you may be able to use two or more of these schemes together but the rules on some of them restrict you to using just that one.

Before you start making plans based on using any of these schemes it is a good idea to check that you are eligible.

And with any major financial decision such as buying a house it is wise to get some good independent financial advice.