There are certain milestones we are all expected to hit as adults: learning to cook, passing the driving test, successfully getting out of debt, getting an adult job, outfit coordination, knowing what to do in emergencies and undoubtedly, buying a house.
It can be incredibly daunting, and depending on which area/type/how many bedrooms etc it can be the single most expensive purchase of your short life. However, saving can be manageable in little steps. Plus, the government is worried about the percentage of young people getting onto the property ladder so have put in placed several schemes to ensure you get there.
1. Help to Buy Mortgages
These are very important if your focus to get onto the property ladder is soon, yet you haven’t got enough of a deposit to meet the standard 10%. The government can help you out again, with a couple of schemes: Help to Buy 2 and Help to Buy 1
Help to Buy 2
This is for people who have a 5% deposit and require a 95% mortgage for houses under £600,000 and are earning a decent income. The government provides a 15% insurance buffer to the lenders, which effectively brings you up to a 20% deposit and decreases the lenders chances of losing money.
This scheme is available to any house (under £600,000) and you will have complete ownership of the house. You will need to look for a 95% LTV loan, which some lenders do and some don’t. So make sure you check out the fine print: the interest levels, rates and terms.
Help to Buy 1
This is for new build houses only. It is designed to get people with a small deposit onto the property ladder. Again, the price limit is up to £600,000 and there is a 5% deposit and criteria checklist requirements. If you’re all good to go, you will be able to borrow a 20% interest free loan from the government from the purchase price and the other 75% you raise a mortgage. Londoner’s will be able to raise a 40% equity loan from the government in a couple of months.
The loan is interest free until 5 years, where it becomes 1.75% from year 6 and onwards. After this, you will be paying for the interest only and not the actual loan. So you will only be paying your 75% mortgage. The downfall of this is when you eventually sell the property, the bank will request 20% of the total sale price. So, if the housing market is in your favour and your property sells for more than you bought it for, you may end up paying more than you borrowed. Otherwise, you will be expected to pay this back once your mortgage has been cleared.
The Help to Buy 1 means you will be saving a lot of money on your interest fees before year 5, and as the mortgage is for 75% only you will be able to access cheaper rates.