First class help for first-time buyers
With a thousand things to think about, the process of house buying may feel overwhelming. So, we have picked out some of the main things you need to bear in mind when you set foot on the first rung of the property ladder.
The good news for first-time buyers is that you could move into a Redrow home with just a 5% deposit. This is possible thanks to a Government-backed scheme that is available to anyone buying a single property who does not already own one anywhere else.
With Help to Buy*, the Government lends you up to 20% of the value of your house to add to the 5% deposit you need to qualify. You can repay this equity loan any time within 25 years (the usual length of a mortgage). If you sell your home, you repay the loan from the proceeds of the sale**. There is no interest to pay for the first five years of the equity loan, which helps to keep down the costs of moving.
With your 5% savings and a 20% Government loan, you will only need to get 75% from a lender (a bank or building society) to buy a new home. The Government provides up to 40% for properties in London, meaning you would only need a mortgage for 55% of the property price. If you buy in England, the cost of your home must be £600,000 or less; for Wales, the maximum amount is £300,000.
First time buyers now also benefit from Stamp Duty relief, which makes moving into your first home more affordable. See details here.
How much do you need to save?
Let’s return to that five per cent deposit you need. According to the Office for National Statistics***, the average house price in the UK in 2018 was just over £230,000. This means you would need to save a deposit of £11,500 to add to the Government-backed Help to Buy loan of 20%.
More Government help
For every £200 you save with a Help to Buy ISA, the Government will add an extra £50. It will keep doing this up to its limit of £3,000 (by which point you will have saved £12,000 yourself, giving you savings of £15,000 in total). While the above example shows this will be enough for most first-time buyers, you will have to open another account if you want to save more.
If the amount of savings you need still looks daunting, it may be that you need to lower what you spend.
Think about your biggest expenses – where does most of your money go? For example, paying rent to a private landlord is expensive. You may be able to reduce this by getting a housemate (or moving in with someone else yourself).
You could also consider moving back in with your parents or other relatives. While this may sound like a backward step it may help achieve your house buying goal and you will be able to work out in advance just how much you can save.
There may also be cheaper properties to rent, either with another private landlord or from your council or a local housing association, if you are eligible (you may need to check).
Keep your goal in mind
Remember, any short-term cut-backs you make to the way you live will help you get what you really want: your own home!
* Find out who is eligible for the scheme here
** Remember that property prices can go down as well as up
*** Office for National Statistics report
Get some practical advice about your move here: https://bit.ly/2FN30fH