Savings Tips

Savings Tips

Government schemes for first time buyers

Saving for your first home whilst renting – what are the options?

Owning a home is high up on a lot of our customer’s priorities lists and we’ve been chatting to a lot of them about which parts of the process they’re finding the most difficult. One keeps coming up though, and that’s the constant push and pull of renting whilst trying to save.

It's important you don't buy avocados if you want a home

With rent often coming in at a similar amount to monthly mortgage payments, it can feel frustrating trying to figure out how to save for your first home whilst also keeping a roof over your head.

There are options available though. We’ve highlighted some of the top ones below to help you figure out if any could work for you. And don’t worry, none of them mention anything about buying less avocados...we’re tired of that line too.  

Equity Loan: Help to Buy Scheme

This governmental scheme is available on some new build properties in the UK.

When you put in a 5% deposit, the government will put in 20% or 40% if the property is in London, the rest is borrowed from the bank.

This opens up a few more options as the loan-to-value rate is lower. Loan-to-value rate is the ratio between what you borrow from the bank and the value of the property you are buying, represented by a percentage.

Let’s take this example. If the value of the property is £300k and you pay a 10% deposit at £30k then you will need to take out a mortgage on £270k which is 90% of the property value. The lower the amount that the lender puts in the better.

In England the scheme is available for properties valued at £600k and below.

Rent to Buy Scheme

Again, only available on new builds which is a little frustrating.

With this option, you rent the property at 20% below market value for up to 5 years. The notion is that throughout this time, the difference in the rent means you will be able to save for a deposit.

Once the five years is up you have a few options. You could buy the property outright or under shared ownership which we’ll cover in a minute. Alternatively, if you haven’t been able to save enough for the deposit then you can move out.

The schemes tend to differ between building associations so be sure to check out a few options if you think this could work for you.  

5% Mortgage

This option has taken a hit from Covid-19 for the time being and has been put on hold. There’s no word yet on whether it’s coming back but we’ll be sure to keep you posted if we hear.  

Just kidding, if you want them, buy them. Be free.

As the name suggests, this scheme means you only need to raise 5% of the property value for a deposit with your lender paying the other 95%.  

So, for example, a property on the market for £350,000, you would only need to raise £17,500 to put down.  

This does come with higher monthly mortgage payments as a downside though so it’s worth doing the math to see how it’ll work out in the long run.

Shared Ownership

This is a longer-term option when it comes to owning a home. The option is there to put down a deposit between 5% and 15%.

You then secure a mortgage that allows you to buy a share of the property from the housing association, usually between 25%and 50% though it can sometimes be more.  

You then pay of the mortgage as usual and pay a subsidised rent on the remainder of the property which can be up to 25% of the usual rental cost.  

You then gradually purchase higher shares of the property until you own 100% of it and the rest decreases as you buy more shares.*

Everyone’s situation is unique to them and so some of these options may be perfect for some and less so for others. There’s a shed load more information on the Help to Buy website to check out but we’ll be keeping you up to date with all our best reads and top tips too.

* Please note that this article was correct at the time of writing and some of these options may not currently be available due to the ongoing Covid crisis.

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Savings Tips

Savings Tips

Government schemes for first time buyers

Saving for your first home whilst renting – what are the options?

Owning a home is high up on a lot of our customer’s priorities lists and we’ve been chatting to a lot of them about which parts of the process they’re finding the most difficult. One keeps coming up though, and that’s the constant push and pull of renting whilst trying to save.

It's important you don't buy avocados if you want a home

With rent often coming in at a similar amount to monthly mortgage payments, it can feel frustrating trying to figure out how to save for your first home whilst also keeping a roof over your head.

There are options available though. We’ve highlighted some of the top ones below to help you figure out if any could work for you. And don’t worry, none of them mention anything about buying less avocados...we’re tired of that line too.  

Equity Loan: Help to Buy Scheme

This governmental scheme is available on some new build properties in the UK.

When you put in a 5% deposit, the government will put in 20% or 40% if the property is in London, the rest is borrowed from the bank.

This opens up a few more options as the loan-to-value rate is lower. Loan-to-value rate is the ratio between what you borrow from the bank and the value of the property you are buying, represented by a percentage.

Let’s take this example. If the value of the property is £300k and you pay a 10% deposit at £30k then you will need to take out a mortgage on £270k which is 90% of the property value. The lower the amount that the lender puts in the better.

In England the scheme is available for properties valued at £600k and below.

Rent to Buy Scheme

Again, only available on new builds which is a little frustrating.

With this option, you rent the property at 20% below market value for up to 5 years. The notion is that throughout this time, the difference in the rent means you will be able to save for a deposit.

Once the five years is up you have a few options. You could buy the property outright or under shared ownership which we’ll cover in a minute. Alternatively, if you haven’t been able to save enough for the deposit then you can move out.

The schemes tend to differ between building associations so be sure to check out a few options if you think this could work for you.  

5% Mortgage

This option has taken a hit from Covid-19 for the time being and has been put on hold. There’s no word yet on whether it’s coming back but we’ll be sure to keep you posted if we hear.  

Just kidding, if you want them, buy them. Be free.

As the name suggests, this scheme means you only need to raise 5% of the property value for a deposit with your lender paying the other 95%.  

So, for example, a property on the market for £350,000, you would only need to raise £17,500 to put down.  

This does come with higher monthly mortgage payments as a downside though so it’s worth doing the math to see how it’ll work out in the long run.

Shared Ownership

This is a longer-term option when it comes to owning a home. The option is there to put down a deposit between 5% and 15%.

You then secure a mortgage that allows you to buy a share of the property from the housing association, usually between 25%and 50% though it can sometimes be more.  

You then pay of the mortgage as usual and pay a subsidised rent on the remainder of the property which can be up to 25% of the usual rental cost.  

You then gradually purchase higher shares of the property until you own 100% of it and the rest decreases as you buy more shares.*

Everyone’s situation is unique to them and so some of these options may be perfect for some and less so for others. There’s a shed load more information on the Help to Buy website to check out but we’ll be keeping you up to date with all our best reads and top tips too.

* Please note that this article was correct at the time of writing and some of these options may not currently be available due to the ongoing Covid crisis.

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