First Time Buyer Mortgage: 6 Schemes to Get You on the Property Ladder

Published: 10/05/2017 and written by Natasha Krovak

First Time Buyer Mortgage: Tips on Saving for Your First HomeA first home is almost guaranteed to be the most expensive thing you will ever buy. Saving for the deposit can be incredibly tricky, not to mention saving for the legal fees too. So any additional help will certainly be welcomed by many! Short term loan provider, Mr Lender, has put together a list of some of the best schemes to help you get a first time buyer mortgage.

first time buyer mortgage

Help to Buy Equity Loan scheme

At the end of 2016, the Help to Buy Mortgage Guarantee scheme came to an end, but the Equity Loan scheme is still available for anyone wanting to buy a home. Unlike most mortgage schemes, both first time buyers and existing homeowners can take advantage of the Equity Loan scheme to purchase a property up to the value of £600,000.

The Equity Loan scheme means a buyer living outside of London can borrow up to 20% of the property value from the government, interest free for five years. Buyers living in the capital can borrow up to 40% from the government. The buyer simply needs to provide a 5% deposit, and take out a mortgage to cover the remaining balance.

To give an example – if the buyer wanted to buy a property valued at £200,000, they would need a £10,000 deposit, a mortgage of £150,000, and the government will supply the other £40,000. The catch? If you sell the property, you will need to give the government back 20% of the property value. This means that if your property then sold for £210,000, you would need to give the government £42,000, and you keep £168,000 to pay off your mortgage.

 Right to Buy

Council house tenants in England, Wales and Northern Ireland can take advantage of the Right to Buy scheme where they can buy their home at a discounted rate. Those who live in Housing Association accommodation may also be able to buy their home through the ‘Preserved’ Right to Buy scheme. In order to qualify, tenants will usually need to have rented from the council for a minimum of three years. This doesn’t need to be three consecutive years, nor does it need to be at the same property – if the tenant rents from the council for a year, before renting privately, then ends up going back to council accommodation for two years, they could apply to buy their home. The Right to Buy scheme applies in England and Wales, though the rules are slightly different for Northern Ireland.

Shared Ownership

When it comes to buying your first home, another option to consider is Shared Ownership. This is where you part own the property, while paying reduced rent to a landlord. The landlord is often the council or housing association, though this isn’t always the case. Shared Ownership homes will usually mean the tenant will own between 25-75% of the property, and they have the option of buying the rest of the home at a later date. There are certain eligibility criteria involved, which includes a salary cap of £80,000 annually for anyone living outside of London, and £90,000 annually for anyone living in the capital.

Help to Buy ISA

Saving into a Help to Buy ISA can be a great way to get onto the property ladder, and getting a first time buyer mortgage. With the Help to Buy ISA, the government will boost your savings by 25% – the minimum amount they will pay out is £400, and the maximum is £3,000. This means if you were able to save £12,000 in total you will get an additional £3,000 from the government to go towards the cost of your first home. Help to Buy ISAs are available from a number of banks, building societies and credit unions.

Help to Buy ISAs are also available for each first time buyer, and not each household – this means that if you and your partner were saving for your first home, you could each open a Help to Buy ISA and take advantage of the government bonus. The only catch is that the Help to Buy ISA can only be used towards the total cost of the property, and not any additional fees such as solicitors and estate agents fees, stamp duty, etc.

First time buyer mortgage

In addition to the Help to Buy ISA, banks also offer other schemes to help you onto the property ladder, such as first time buyer mortgages. To apply for this type of mortgage, the prospective buyer needs to provide a deposit of just 5%, compared to other types of mortgage where the minimum deposit is usually much higher. Banks may even offer additional perks such as cashback.

Lifetime ISA

The Lifetime ISA, or LISA as it is affectionately known, is another bank scheme available to help first time buyers get onto the property ladder. The LISA can be used to save for either, retirement or a first home up to the value of £450,000. Anyone aged 40 or younger can apply for this account, where they can put away up to £4,000 a year. The government will then add an additional 25p for every £1 saved into the ISA.

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