With high property prices and higher rental costs it is becoming difficult to save for a deposit. There are several schemes available to help get your foot on the ladder. Shared Ownership and Right to Buy are the current most popular options but these will change as governments try to help people get on the ladder.
Most of these schemes are limited to specific properties typically new homes or recently built properties. However, they can benefit you by only needing a small deposit, 5% with a lot of lenders, to secure your property.
New build purchases can feel more pressurised due to the selling requesting that exchange of contracts takes place before 28 days have passed.
Shared Ownership
As it suggests, with this scheme you purchase a percentage of the property from either the current private owner or a housing association. The share is often between 25%-75% with rent paid to the housing association for the remaining share. You can usually purchase with a 5% upwards deposit however there are affordability assessments that need to be passed not only with the mortgage lender but the housing association too.
Right to Buy
If you are currently renting a local authority owned property you might be able to apply for the ‘right to buy’ this property from the council. You could be eligible for a discount against the current market value of up to 40%, this discount would then act as your personal deposit with most mortgage lenders. You will then only need to cover your legal costs and potential valuation fee.
Mortgage Guarantee Scheme
This will allow you to buy a home with a 5% deposit (usually second hand homes). The guarantee helps give the lenders confidence with low deposit borrowing. In the event of a repossession the government compensates mortgage lenders for a portion of net losses down to 80% of the property value. This is trick to use on “New Builds” and flats and a lot of lenders require larger deposits for this.
Deposit Unlock
A new mortgage scheme that was created by the Home Builders Federation and backed by the government. It will help first time buyers or current homeowners secure a mortgage with just a 5% deposit (£750,000 maximum). This is for new-build homes from participating home builders. You will not be able to own another property post completion though, so not suitable for people with Buy To Lets or Second Homes.
Kind of similar to the Mortgage Guarantee Scheme, repossed properties have their mortgages insured, but this time by the builder.
Own New
The Own New scheme is a program in the UK that helps make new build homes more affordable. It offers two options to help buyers secure a mortgage:
Deposit Drop
Allows buyers to secure a mortgage with a deposit as low as 5%. This is significantly less than the average deposit of 15%.
Rate Reducer
Helps buyers secure a lower fixed term interest rate on their mortgage for a set period of time. This can reduce monthly repayments for the first 2 or 5 years.
The Own New scheme works with over 60 property developers and certain lenders.
Some potential drawbacks of the Own New scheme include:
- Limited choice: Buyers may have less choice of properties as they need to buy from a developer that’s signed up to the scheme.
- New build premium: New build properties depreciate in value as soon as they’re purchased.
Please feel free to read our “Helping Hands” document in this link, which is our guide to buying, remortgaging and protecting your home.
Your home may be repossessed if you do not keep up with your repayments on your mortgage.
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