For most first-time buyers, the biggest hurdle to overcome when wanting to buy your first house is saving for that initial deposit. With constantly rising property prices and the cost of living just going up and up, saving thousands of pounds can seem out of reach for many buyers. The good news is that there are many strategies, schemes and saving methods that can help make saving for that deposit much more achievable.
Developer Deposit Schemes
An increasingly more common scheme first-time buyers are using to be able to afford their first home is through developer deposit schemes. Never heard of it? Well, they’re incentives offered by property developers, mostly on new builds, to help attract potential buyers whilst also making the purchase of a home more affordable.
They usually offer to contribute in some way towards the deposit of the property. This can be done by covering a set percentage (like 5%) of the deposit, or could offer to pay the stamp duty on it if the cost of the property meets the threshold at which it needs paying. Either way, it reduces the amount you have to save yourself and can help speed up the process when you are able to purchase a property.
Opening A Lifetime ISA
One of the most popular savings tools for UK buyers is the Government-backed Lifetime ISA (LISA). It’s designed to help first-time buyers get onto the property ladder faster by rewarding investing in your savings with a healthy bonus. You can put in a maximum of £4000 per tax year, so with the 25% bonus, you can earn up to an extra £1000 every year for your deposit.
There are a few rules and qualifiers to keep in mind. Like, you have to be between 18-39 to open one, and you will be hit with a penalty of 25% if you withdraw money for any reason other than using the money for your deposit (unless you’re over 60). However, overall, it’s an incredibly powerful tool to utilise, especially if you’re looking to fast-track your deposit savings and buy that property ASAP.
Buying Through Shared Ownership
With more and more people struggling to get on to the property ladder, lenders are becoming more willing to offer lower deposit mortgages. Buyers are now more commonly able to purchase a property with a deposit of only 5% of the property’s value.
These types of mortgages have become increasingly more available since the Government-backed Mortgage Guarantee Scheme. This scheme works to encourage lenders to offer these 95% loan-to-value mortgages by reducing some of the risks involved for the lenders. It’s a really good option for anyone struggling to save a larger deposit, but be wary that interest rates can be higher with these mortgages so you’ll end up paying a lot more longer term compared to mortgages with higher deposits.
The journey to home ownership can take time. By taking advantage of all the schemes, bonuses and advice you can, you’ll be able to make the goal of purchasing your first home a much more achievable one.
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