The dream of owning your first home can feel daunting, especially with the challenge of saving a substantial deposit. Thankfully, the UK government has several schemes designed to give first-time buyers a helping hand. Understanding these options is the first step towards turning your homeownership dream into a reality.
At Peppercorn Finance, we believe in empowering you with knowledge. Here’s our breakdown of five key government schemes that could help you secure the keys to your first property.
1. The Mortgage Guarantee Scheme
This scheme was introduced to increase the availability of 95% loan-to-value (LTV) mortgages, meaning you only need a 5% deposit.
How it works: The government provides a guarantee to lenders for the portion of the mortgage between 80% and 95%. This reduces the lender's risk, making them more willing to offer mortgages to buyers with smaller deposits. You still borrow the full 95% and are responsible for all repayments.
Who is it for? First-time buyers and current homeowners looking to move, purchasing a property valued up to £600,000.
Key takeaway: This scheme makes low-deposit mortgages more accessible from high-street lenders, but it doesn't lower the cost of your monthly payments.
2. Shared Ownership
Shared Ownership allows you to buy a share of a property and pay rent on the remaining portion, making it a more affordable route to homeownership.
How it works: You buy a share of a property (typically between 25% and 75%) from a housing association. You'll need a mortgage to cover your share, and you'll pay subsidised rent on the share you don't own.
Who is it for? First-time buyers, those who used to own a home but can’t afford one now, and existing shared owners. Your household income must be less than £80,000 (£90,000 in London).
Key takeaway: You can buy more shares over time through a process called 'staircasing', eventually owning 100% of your home.
3. The Lifetime ISA (LISA)
A Lifetime ISA is a fantastic tool for boosting your deposit savings. For every pound you save, the government adds a generous bonus.
How it works: You can save up to £4,000 per year into a LISA, and the government will add a 25% bonus (up to £1,000 per year). The funds can be withdrawn tax-free to be used as a deposit for your first home.
Who is it for? UK residents aged 18-39. You must have the account open for at least 12 months before you can use it for a home purchase.
Key takeaway: This is essentially free money towards your deposit. If you and a partner are buying together, you can both use a LISA, potentially gaining a £2,000 bonus each year.
4. The First Homes Scheme
This scheme helps local first-time buyers and key workers buy a home in their community by offering properties at a significant discount.
How it works: New-build homes are offered at a discount of at least 30% compared to their market price. This discount is passed on to future buyers when you sell, ensuring the home remains affordable for the community.
Who is it for? First-time buyers who can get a mortgage for at least 50% of the home's value. Local councils may also set their own criteria, such as prioritising key workers.
Key takeaway: This offers a substantial reduction in the purchase price, making it much easier to get on the ladder in your local area.
5. Right to Buy
The Right to Buy scheme allows most council tenants to buy their council home at a discount.
How it works: If you’ve been a public sector tenant for at least three years, you may have the right to buy your home. The discount is based on your location, the type of property, and how long you've been a tenant.
Who is it for? Eligible council and housing association tenants in England.
Key takeaway: This can provide a huge discount on the market value of your home, giving you instant equity.
Let Peppercorn Finance Help You Navigate Your Options
Choosing the right scheme depends entirely on your personal circumstances. It's crucial to understand the details of each before making a decision.
If you’re ready to explore your mortgage options and take the first step towards homeownership, contact Phil today. I can help you find the right path for your journey.