The cost of owning property make it hard for first-time buyers looking to buy their first home. However, there are several schemes available that might help achieve it. Here’s an overview of the 5 key options.
The Lifetime ISA
Introduced in 2017, the Lifetime ISA is a savings account that assists with your first home purchase or retirement saving. You can contribute up to £4,000 each year until you turn 50, and the government adds a 25% bonus, capped at £1,000 per year. It’s open to those aged 18 to 40. The home you buy must cost £450,000 or less. If you take out money for a more expensive home, you’ll face a 25% penalty, which deducts from the government bonus and your savings.
Shared Ownership
With shared ownership, first-time buyers can buy a portion of a property – typically 25% to 75%, occasionally as little as 10% – and pay rent on the remainder. This method often involves a lower deposit and mortgage than a outright purchase. Rent is below market rate, generally about 2.75% of the landlord’s share annually. Some shared ownership residents have, however, faced service charge increases, maintenance issues, costly lease extensions, and selling restrictions. You can increase your share to full ownership over time through ‘staircasing’. Each UK region has its own eligibility criteria, but usually, your household income must be below a certain threshold.
Rent to Buy
Rent to Buy allows tenants in England to rent a home at about 20% less than the local market rent, aiding in saving for a deposit. To qualify, you must be working, a first-time buyer, and able to afford rent and save simultaneously. Typically, initial rental agreements are up to two years, with possible extensions. The scheme varies by region and isn’t available in Scotland. Rentplus is a private rent-to-buy provider in England, offering a chance for first-time buyers to save for a deposit over 5 to 20 years.
London Living Rent
Similar to Rent to Buy, London Living Rent caters to those living or working in London, earning a maximum household income of £60,000, and unable to own a home or buy through shared ownership in their current area. The rent is set below the average, making properties highly sought-after. Tenants usually get a tenancy for at least three years, with the intention to purchase the home within 10 years.
First Homes for First-Time Buyers
In England, the First Homes scheme allows first-time buyers to purchase a home for 30-50% less than the market value. There is no rent involved. Eligibility includes an income cap of £80,000 per year (£90,000 in London), and local councils may have additional conditions. Newly built First Homes are capped at £250,000 after the discount, or £420,000 in London.
For more detailed information on these schemes, visit The Guardian’s website.
