Buying your first home can be an exciting, but also daunting experience and with the average deposit being many tens of thousands of pounds it’s also an expensive venture.
In addition to the £425,000 that is free of stamp duty, the Government has several schemes to help first time buyers get on the property ladder.
As a broker, we are regularly helping guide first time buyers through the process and here’s an overview of three of the most common schemes available for first time buyers.
Lifetime Individual Savings Account (LISA)
A LISA can be utilized for the purchase of your initial home (for a property valued at £450,000 or less) or for saving towards future endeavours. To open a LISA, you must be aged between 18 and 39.
You can contribute up to £4,000 annually until you reach the age of 50. The initial payment into your ISA must be made before you turn 40. The government will enhance your savings with a 25% bonus, capped at £1,000 per year.
If both you and another first-time buyer, who also possesses a LISA, are purchasing a property together, both LISAs can be used for the same property.
It’s important to note that withdrawing funds from a LISA without allocating them for a deposit or after reaching the age of 60 incurs a penalty.
Help to Buy ISA
For those who opened a Help to Buy ISA before the conclusion of November 2019, it remains usable for a deposit if the purchase is made before December 2030.
Similar to the Lifetime ISA, this account grants a 25% bonus on savings. However, the monthly savings limit is £200, contrasting with the £4,000 annual limit of the Lifetime ISA.
Help to Buy Mortgage Guarantee Scheme
Introduced in the 2021 Budget, the mortgage guarantee scheme provides lenders the option to secure a guarantee on mortgages where a first-time buyer has a 5% deposit.
The scheme is in effect until June 30, 2025, and compensates mortgage lenders in case the buyer is unable to make payments, leading to repossession.
The guarantee covers 80% of the property’s purchase price, safeguarding lenders from up to 95% of potential net losses. The remaining 5% of losses remain the responsibility of the lender, ensuring they bear some risk in every arranged loan.
If you are a first time buyer then speaking with a broker can be invaluable as we’re able to look at products from a range of lenders as opposed to just one where you approach a bank directly. If you have any questions, just drop us a call on 01322 553282 or contact us online.