Wednesday 13th December 2017

Is there really any help for first time buyers?

Buy a home and you can have as messy a bedroom as you like!

Getting on the property ladder is a priority for me right now. As I tread the hard road to home ownership, I can’t help but wonder why it’s so difficult now compared with our parents’ generation.

According to research by Yorkshire Building Society, one in two people aged 35-40 who are not homeowners think it’s unlikely, or very unlikely, that they will ever own a home.  That’s a pretty staggering figure, right? But not a surprising one.

With the average house price tipping £300k, and huge deposits needed, it really doesn’t surprise me that so many of us are struggling to get so much as a little toe on the property ladder.

There are numerous schemes out there to help, and I’ve researched them all to death. And honestly? I haven’t found any of them to be of much use. Let’s take a look…

Help to Buy ISA

For every £200 you save, you can receive a government bonus of £50. The maximum government bonus up for grabs £3,000. Catches? The bonus only pays out after mortgage completion, so in real life terms it doesn’t help you with a deposit. Also you can only contribute to one ISA per year, so if you’ve got one of those useless ISAs, close it down and get one of these.

Verdict: not to be sniffed at… but not as good as it sounds

Lifetime ISA

The recently-launched Lifetime ISA offers a tax-free boost of up to £1,000 a year towards either buying your first home or saving towards retirement. However they aren’t available at any high street lenders, and are only available as either cash or stocks and shares.

Verdict: I want cold hard cash, not stocks and shares. What is this? Confusing.

Help to Buy Equity Loan

The government will help you with a deposit by lending you 20% of the cost of your newly built home, leaving you to put in a 5% cash deposit and get a 75% mortgage. This is only available on new homes.

Verdict: if you want to buy that beautiful Victorian conversion you’ve dreamt about, count this out.

Starter Homes

200,000 brand new homes sold at a minimum discount of 20%, with the first completions planned for 2018. There’s a £250k price cap rising to £450k in London.

Verdict: looks pretty good. Though all I can see is nice houses on the edge of some derelict industrial estate. We’ll see.

Shared Ownership

I’m not a fan of Shared Ownership, and everyone I know who has purchased through Shared Ownership feels the same, simply because it’s a sneaky little scheme. You can purchase a 25-75%  share of the home and rent the remaining share. You then buy back the rented proportion over time but anything you buy back is based at the current market value, plus fees. So you’ll probably end up paying more back.

Verdict:  Just don’t bother

Buying is stressful enough without being tripped up by hidden rules and complex regulations. So is there genuine help out there for first time buyers? Well yes, to an extent…but it’s definitely not all it seems.

Photo by Toa Heftiba on Unsplash.

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CHRIS BUDD

CHRIS BUDD

CHRIS BUDD RUNS A FINANCIAL PLANNING PRACTICE AND IS AUTHOR OF THE FINANCIAL WELLBEING BOOK. HIS OPINIONS ARE TRUE OPINIONS.

There’s a famous story about the man who got lost outside Dublin. He stopped and asked a local for directions, and received the reply “Well, I wouldn’t start from here.” There is a general assumption that we have to own a home. What is behind this? The clue is in the phrase ‘property ladder’. My generation and older (I’m 50 this year! I know! You’d never guess it!) have benefited from ever increasing house prices. The assumption, therefore, is that buying a property is the first step on the ladder, and it’s all up from there. That’s not always the case. I remember the early 90s, when a neighbour had their house on the market for a year without a single viewing. They couldn’t move due to negative equity. They were stuck. If you do want to own your home, there simply is no magic answer. There is only savings. Stick some money away on a regular basis, make the most of the tax breaks available, and get on with your life.  

Want more? Go to Financial Wellbeing website for more info.
Please note: if you do require financial advice, go to unbiased.co.uk

Leanne Franklin

Leanne Franklin

Mouthy Blogger

West Midlands lass trying to get on the housing ladder in the smoothest way possible. Likes drinking wine and dancing.

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