For many, buying a first home is one of life’s essential goals. It means you have a place to bring up a family as a well as an asset that can offer financial security, as well as meaning you don’t have to pay rent, which is often much higher than mortgage repayments.
Yet, owning a home is set to remain just a dream for an increasing number of people. It’s no wonder when you consider the average price of a property in the UK is over £200,000 and rising according to the UK House Price Index. If you can’t turn to the ‘bank of mum and dad’ then saving up the required deposit of 10% or 20% is simply beyond the means of most people. So, is there anything at all you can do to get onto the property ladder if you have limited finances? Well, here are some ways you could…
Option 1: Save as much money as you can.
This may seem very obvious at first but saving as much as you can will require you to completely re-evaluate your household budget from top to bottom. As well as recording all incoming money, write every outgoing expense down and see where you can make cut backs, within reason. It may also be worthwhile talking to a professional advisor to see where any savings can be made. Every pound you save is one pound more you can put towards your deposit. It can be surprising that how these small amounts saved in the short-term mean in the long-term you get your deposit a whole lot quicker than you would have done otherwise.
Option 2: Help to Buy ISA
If you don’t yet know about the different Help to Buy initiatives introduced by the government, now is the time to find out. Help to Buy comprises a number of schemes especially aimed to help first-time buyers. For instance, the Help to Buy ISA allows first-time buyers to receive a £3000 bonus if they save up £12,000 in their Help to Buy ISA. Savers can also earn up to 4% interest on their savings. If you’re a couple saving up for a deposit then each person can open up a separate account, which means you both get a bonus as well as the added interest.
Option 3: Help to Buy: Equity Scheme
With the Help to Buy: Equity Loan Scheme, the government gives a loan of 20% of the purchase price to add to the housebuyer’s 5% deposit. This means the buyer can access a much better mortgage deal because of their relatively large deposit.
The government loan is interest free for the first five years after which it’s paid back at 1.75% of the equity loan value plus 1%. This loan is exclusively available on new build homes. Help to Buy: Equity Loan has already been successfully taken up by first-time buyers right across the country and resulted in a boom in new home sales. There are also other purchase initiatives you should check out, such as the Shared Ownership scheme or the Mortgage Guarantee scheme.
So, whether it’s through dedicated saving or taking advantage of the government’s Help to Buy schemes, there are indeed options out there to getting that foothold on the first rung of the property ladder. When not all of us have an account with the bank of mum and dad, it’s especially good to know.