Raising the deposit for a new home is a major hurdle for many first-time buyers. Saving up can be a daunting proposition as many lenders require a high percentage. Typically, London a first-time buyer Deposit is around 18%.
If you’re hoping to buy your own home but are struggling to find the money for your deposit, read on…
First Buy Scheme
A new government scheme has just been launched to hopefully help first-time buyers get on the first rung of the property ladder. Through the scheme, homebuyers who are struggling to find funds will be able to buy their own home by putting in just 5% as a deposit.
Here’s how it works: the buyer puts down 5% – then the government and property developers would offer you a 20% equity loan. This then enables you to take out a 75% mortgage. The scheme only applies to specific new-build developments.
The equity loan will be interest-free for the first five years. In year six, some interest will start to be charged.
The loan will be repaid when the property is resold. The funds will then be recycled to fund more homes for the scheme. Homes should be available from September this year.
You can keep an eye on what’s happening at the Government advice site, Helptobuy.
The FirstBuy scheme is designed to help around 10,000 families to get onto the housing ladder for the first time. However, there are critics who believe that the scheme will be oversubscribed and will not make much impact on the housing market. In addition, there has been some skepticism around the scheme in the press, claiming it could be locking young first-time buyers into a falling market.
At least schemes like this give first time buyers one less thing to worry about so they can focus on worrying about other issues that websites like Homeowner Handbook aim to help them with.
Saving up for your first-time buyer deposit
If you’re planning to save up for a deposit, here are a few simple tips:
– Set up a savings account with high interest or opt for a tax-free ISA.
– To avoid impromptu withdrawals, maybe choose a savings account where you have to give prior notice if you want to take out money.
– If a friend or family member is lending/giving you the deposit – it’s normally best to transfer it to your own account before applying for your mortgage
– Try to avoid borrowing your deposit, as two large debts could put you under strain financially.
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