First Time Buyer Schemes

Schemes for First Time Buyers

Purchasing your first home can be an exciting yet daunting journey. We can guide you through the various schemes offered by the UK government and Mortgage Lenders to assist first-time buyers in buying a home

Mortgages for first time buyers

Mortgage lenders are always keen to help first time buyers to buy their first home.

With most lenders you will need a minimum 5% deposit.

Mortgage lenders are keen that the borrower puts some of their own money into the new property.

However if you have been a reliable Tenant with no missed payments then it may be possible to arrange a mortgage with 1% deposit or indeed no deposit. See 100% mortgages

Other schemes include Guarantor Mortgages, where a family member, normally a parent uses their income to guarantee that the mortgage will be paid. This type of arrangement extends to Joint borrower Sole Proprietor.

Some lenders will accept a deposit being paid into a Bank account with the lender in the name of the Donor. This deposit is held as security against the property and is frozen for a period of 5 years earning interest at which point the deposit is returned to the Donor.

The advantage of this arrangement is that the deposit is not gifted and is returned to the Parent with interest at the end of a 5 year period

Mortgages Direct can help with these mortgages. We charge no fees providing your mortgage is over £100k

Read more about why use a Mortgage Broker

Please click on Mortgage Enquiry to begin your journey

Joint Borrower Sole Proprietor

The high cost of housing in the UK has made it difficult for first time buyers to afford to buy a home.

One solution to this problem is to involve the Parents (or other relations) in what is known as Joint Borrower Sole Proprietor (JBSP Mortgages)

This arrangement enables the use of the income from a Parent together with the Applicant which hopefully enables the Applicant to buy a property they like.

The mortgage is in joint names but the property deeds are in the Applicants names only. The benefit of this arrangement is there are no tax implications when the joint mortgage is transferred into the Applicants name only

There can be up to 4 Applicants in this type of arrangement, with all 4 incomes being considered.

Please note that not all lenders will consider all 4 incomes

Typically the non-occupiers will need to take independent legal advice

The maximum term may be limited by the oldest applicant

We can arrange this type of mortgage and encourage you to complete the Mortgage enquiry form

Shared ownership

Shared Ownership allows first-time buyers to purchase a share (usually between 25% and 75%) of a property and pay rent on the remaining share. This scheme is particularly beneficial for those who are unable to afford the full cost of a home outright.

You can only buy a property that is managed by a Housing Association or Local Authority (the landlord). Although some Shared Ownership properties may be visible through Estate Agents. Only certain property, which should be clearly labelled, will be available for Shared Ownership

As your income increases over time, you can opt to mortgage (or buy) a larger share of the property until you own 100% at which point the property is wholly yours!

There are several factors to consider:

Only property designated 'Shared Ownership' is available to you
You will only be able to proceed if the financing is affordable. We can help with this
The property will be leasehold and subject to Ground rent and Service charges (paid to the Housing Association)
The rent is liable to increase over time
The service charges may go up over time
The rented element will increase in value over time. So it is likely to cost you more to buy the rented share in the future

Why does Shared Ownership enable you to borrow more?

If you are buying a new home then the rented element will be charged at 3% (or less). This rate is lower than the current mortgage rates AND you are not repaying this element as you will be on your main mortgage. Effectively the rented element is similar to an interest only mortgage.

This means that a shared ownership arrangement should be more affordable than a capital and interest mortgage for the full amount.

Can I buy a previously owned property using Shared Ownership?

Yes, providing the property was previously financed by Shared Ownership or is being offered by a Housing Association under Shared Ownership

If you are buying a property that was previously financed using Shared Ownership, please note that the rental element will be set at the same interest rate as the previous owner was paying

How much deposit will I need for Shared ownership?

Your deposit will usually need to be 5 or 10% of YOUR SHARE of the property.

Let's look at an example....

Say the Property is valued at £300,000 (FULL VALUE)

You are interested in buying a 40% share, with a value of £120,000

Your deposit could be £6,000 (5% of £120,000)

You will have a shared ownership mortgage for £114,000

and you will be liable to pay rent on the remaining 60% share

First Homes Scheme

The First Homes Scheme enables you to buy a home with a 30 - 50% discount applied.

There is no rent to pay on the discounted element

But when you come to sell the same property, in the future, you will also need to sell at a discount!

There are some qualifications...

First Home Scheme - Do you qualify

You must all be first time buyers

Your joint income must be less than £80,000 pa (£90,000 pa in London) for the previous tax year

You will need to take a mortgage for at least half of the property value.

Local eligibility criteria may apply. For example, your may need to be Key Workers. Or you may need to be already living in the area.

The armed forces and their families may not need to meet these requirements

How does the First Homes Scheme work

New Homes Properties cannot be sold for more than £250,000 (after discount). In London the limit is £420,000 (after discount)

You will need a deposit of at least 5%

For example, if the purchase price is £200,000 you will need deposit funds of at least £10,000 (5%)

In this example, you will need a mortgage for £190,000

You will need to find a Solicitor or Conveyancer for this purchase

You may need to pay a reservation fee to the Developers (check that this is refundable!)

An application is made to the local authority to check that you qualify, if satisfactory, you can proceed with the mortgage application

We can help with the mortgage application - click here to begin the process

Help to Buy Scheme

This scheme is currently only available in Wales and is scheduled to close for applications in December 2024.

You can only use this scheme to buy New build property in Wales

You will need a minimum 5% deposit

The scheme provides you with a loan for up to 20% of the purchase price.

You will need to take out a capital and interest mortgage to cover the balance

Eligibility for Help to Buy

The property needs to be a new property in Wales

The builders must be registered to offer property under this scheme

There is a maximum price limit of £300,000

This should not be a second home

You should intend to live in the subject property

You will need a minimum 5% deposit

Help to Buy Equity loan

The help to buy equity loan is interest free for the first 5 years.

After this you will be charged interest at 1.75% pa

The interest rate increases each year by the retail price index plus 1%

There is a monthly management fee of £1 until the equity loan is repaid

TAKE CARE

The loan is linked to the value of your home. So if the value increases, the value of your loan will also go up!

For example

Home bought for £200,000 using a Equity loan of £40,000 (20%)

For the first 5 years you will not pay anything for the Equity Loan of £40,000

In 5 years time the property value has increased to £220,000

If you choose to clear the Equity element it will now cost £44,000 (20% of £220,000)