Purchasing a home is an exciting yet challenging milestone in many people’s lives. With rising property prices and the need to save substantial deposits, getting on the property ladder can seem daunting, especially for first-time buyers. Thankfully, the UK government has introduced various schemes over the years aimed at helping more people realise the dream of homeownership.
These schemes provide financial assistance, reduce deposit requirements, or enable people to gradually purchase bigger shares in a property over time. By understanding the different options available, you can identify the best route to suit your needs and budget.
*This is a collaborative post. Image Source.
*This is a collaborative post. The First Homes Scheme
One of the most recent schemes introduced is the First Homes scheme, launched in 2021. It is designed exclusively for first-time buyers and enables them to purchase newly built homes at a discount of at least 30% below market value. This substantially reduces the deposit required, with buyers only needing a 5% deposit on the discounted price. The rest is funded by a mortgage.
Not only does this improve affordability initially, but the discount is fixed for the lifetime of the property, meaning future buyers will also benefit. So it helps first-time buyers get on the ladder and acts as a long-term boost to local affordability.
The scheme has stringent eligibility criteria, including income thresholds, local connections to the area, and not already owning a property. The discounted homes are prioritised for first-time buyers but are available to other buyers if unsold after a period. The scheme is still in the early stages, but many see it as a positive step in helping more first-time buyers achieve their dreams of homeownership.
Help to Buy Scheme
While the Help to Buy scheme has now ended for new applicants in England, it is still available in Wales until 2023. It has been widely used by over a quarter of a million buyers throughout the UK since its launch in 2013. The Help to Buy scheme enabled first-time buyers and existing homeowners to purchase newly built homes with just a 5% deposit. The government provided an interest-free equity loan for 20% of the property price (40% within London) for five years. This significantly reduced the deposit required while also making mortgage payments more affordable.
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Although no longer available for new applicants in England, the scheme has undoubtedly helped numerous first-time buyers and other purchasers onto the property ladder who otherwise would have struggled to buy. It enabled them to achieve homeownership with a much smaller deposit and reduced mortgage costs during the early years of ownership. Many will see their equity share increase over time, boosting their chances of full ownership in the future.
Shared Ownership
Shared ownership provides another potential route to homeownership for those unable to purchase a home outright. It enables buyers to purchase an initial share of a property, typically between 25%-75%, and pay subsidised rent to a housing association on the remaining share. The buyer needs a mortgage and deposit only on the portion they are purchasing upfront. Shared ownership is open to both first-time buyers and existing owners.
There is the option to staircase up and buy larger shares of the property over time until you own 100% of it. Living in shared ownership still enables buyers to get on the ladder and start building equity.
It also means paying below-market-rate rents on the unsold portion. There are over 200,000 shared ownership homes in the UK, with tens of thousands of new homes planned in the coming years. For example, there are excellent opportunities for shared ownership in the area of Kent.
Right to Buy Scheme
The Right to Buy scheme has been available to council tenants since the 1980s. It enables eligible tenants who have lived in their council property for at least three years to buy it outright at a discount of up to £87,200 across England. The discounts increase based on the length of tenancy. Right to Buy aims to help council tenants onto the property ladder who otherwise may struggle to buy.
Since being introduced, over two million council homes have been purchased through the Right to Buy scheme.
Critics argue this has depleted social housing stock at a time of shortage. Others highlight it as an opportunity for long-term council tenants to finally purchase their own home. Eligibility criteria include the property being your only home, having a secure tenancy, and having lived there for three years. Financial assistance with mortgage payments may also be available. For council tenants, Right to Buy could provide a path to much-longed-for homeownership.
Lifetime ISAs
The Lifetime ISA scheme is a government initiative created to help younger adults save for their first home and retirement. It provides a generous 25% bonus on savings of up to £4,000 per year. Lifetime ISAs can be accessed penalty-free after 12 months to put towards a first home purchase worth up to £450,000. Alternatively, the funds can be withdrawn after age 60 for retirement.
Lifetime ISAs provide an added incentive to save for big life purchases like a home. The bonus contribution boosts savings by 25%, so saving £4,000 per year adds £1,000 in government bonuses. For first-time buyers, this builds up a larger deposit faster while also earning interest or investment returns. 16-40 year olds are eligible to open a Lifetime ISA, making it an attractive option for young savers with aspirations of homeownership. The dual-purpose account means the savings won’t be lost if they are ultimately used for retirement instead.
Older Persons Shared Ownership
Shared ownership isn’t just for young first-time buyers. There are also shared ownership schemes available for older buyers aged 55 and above. Older Persons Shared Ownership or OPSO enables this demographic to purchase a share in a purpose-built shared ownership home. Shares of between 25%-75% can be purchased initially.
There are more than 3,000 shared ownership homes reserved for older buyers across the UK. OPSO provides financial and housing flexibility in later life. Buyers can use pensions or savings to fund the initial share purchase. If they already own a home, this can be sold to raise additional funds as there are no restrictions on previous ownership.
OPSO buyers also don’t pay rent on the unsold share once they reach 75% ownership. This allows older buyers to rightsize into a new home while still retaining partial ownership. It enables access to quality housing and onsite amenities while reducing costs. OPSO offers an innovative route for older buyers to get on the ladder.
Home Ownership for People with Long Term Disabilities
The HOLD or Home Ownership for People with Long Term Disabilities scheme aims to help people with disabilities access suitable and affordable housing. HOLD assists buyers in purchasing fully accessible shared ownership homes where their needs cannot be met through usual shared ownership schemes. It provides an alternative option for buyers who require extensive adaptations or specially designed accommodation.
Under the HOLD scheme, buyers can purchase an initial 25-75% share in a purpose-built accessible property. Specialist housing associations work in partnership with local councils and developers to deliver suitable homes under HOLD. Priority is given to buyers with physical or learning disabilities, sensory impairments, mental health issues, and other conditions requiring accessible housing. HOLD opens up homeownership to buyers with disabilities who otherwise struggle to find and afford suitable properties.
Assessing the Options
With an array of government schemes available, it’s important to assess your own situation to identify the most suitable options. Consider your:
- Budget – How much can you afford for a deposit, mortgage payments and ongoing costs?
- Income – Are you above the threshold for certain schemes?
- Savings – How much have you already saved? Can you save monthly through a Lifetime ISA?
- Property preferences – Do you want a new build or an existing home? Shared ownership or outright purchase?
- Location – Which schemes are available in your desired area?
- Circumstances – Are you a first-time buyer? Council tenant? Older buyer? Have specific housing needs?
Discussing your needs and financial capabilities with a mortgage advisor or housing specialist can help narrow down the schemes that are most appropriate. You can then investigate suitable properties and further eligibility. The application process varies across schemes. However, common requirements include proof of income, savings, employment status, ID, and immigration status. Applicants must often be creditworthy with a clean credit history. Competition can also be high for certain schemes and locations. Therefore, assess all options and then act quickly when suitable properties become available.
Achieving the Dream
Owning your own home is a major aspiration for many across the UK. Saving enough for a deposit while meeting stricter mortgage lending criteria can seem unattainable. However, the government’s shared ownership, equity loan, discounted purchase and savings bonus schemes exist to help buyers realise their property-owning dreams.
Matched with your own financial planning and preparation, these schemes could help you achieve your goal too. Do your research, speak to experts, and consider all your options. You could find yourself joining the many buyers who have successfully navigated the ladder of government homebuying support. One day, you too could have the keys to your very own home, thanks to a scheme designed to help you buy.
*Disclaimer – This is a collaborative post. This post has been pre-written.
