If you are a junior doctor, or just out of dental school, you may be dreaming of home ownership but also wondering how you will afford the deposit on a lower starter wage and with university debt to pay off. The government recognise the struggle of the modern young people, particularly those living in places like London, where rent is high and so are house prices. What help is available for you to get on the ladder?
This does not constitute advice and advice should be sought in all instances before acting on it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
3 Help to Buy options for you
(1) Help to Buy ISA
It may be that home ownership is on your wish list, but not right now. Maybe you are comfortable with the freedom that comes with renting but would like to start saving towards buying your own property sometime in the future.
The Help to Buy ISA is designed to boost your savings so you have a bigger pot, sooner.
How it works:
- The government add 25% to your savings, to help you save faster
- For example, if you save £200 per month, you will end up with £250 in total, as the government add £50 too.
- There is a cap. The maximum bonus you can earn is £3,000.
- This would be the result of saving £12,000 yourself, which would take four years
- Visit the Help to Buy website here to use the calculator bonus. You can enter the amount of your total savings to work out how much of a top-up the government will give you.
In addition there is the Lifetime ISA which is a new product from April 2017, which allows you to save for your first home, or your retirement, simultaneously.
(2) Help to Buy Equity Loan
The Help to Buy Equity Loan applies to new build homes only.
In summary, this is how is works:
- The government loan you up to 20% of the cost for a new build home
- There is a 5% cash deposit requirement, which you need to fund
- This means you will have a total 25% deposit
- The loan is exempt from fees for the first 5 years
- In year six, you will incur a fee of 1.75% of the value of the loan
- The fee increases each year in line with inflation
- The fee is on top of payments to repay the government loan
If you choose to put down a larger deposit then this is fine, and actually works in your favour as a wider choice of mortgage products becomes available, with lower rates of interest.
Sound interesting? Speak to our mortgage adviser, Chris for more information.
(3) Shared Ownership Scheme
Shared Ownership has become an option for many young people as a starting point to get on the property ladder.
It means that for a period of time you share the ownership with the government, but typically you have the option to increase your share and eventually own your house, outright.
Because you have only a share in the property, the deposit requirement is based on the share proportion, which can be advantageous if you don’t have sufficient savings. On occasions, there is no deposit required.
How it works:
- Typically, a 5% deposit is required relating to your share proportion. Some lenders do now accept 0% deposit on this scheme, as it is government backed so less risk for them.
- The percentage share you choose to buy can be between 25% and 75% of the market value, giving you some flexibility in your starting point.
- Month is charged on the remaining share, which belongs to the government
- The share you own can increase when you are able to afford to do so
With rents so high and the general view that with renting you are lining someone else’s pockets, shared ownership allows you to at least own a proportion of a property. It is a stepping stone to full ownership in the future.
It is worth exploring the regular mortgage route too. There are some mortgage deals that require a low deposit, sometimes only 5 percent.
For more information about buying a home. Speak to Chris
If you would like to discuss Help to Buy or other mortgage options, speak to our specialist mortgage adviser, Chris.
Tel: 01403 780 770
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