First time buyers in 2023 may well be wondering what will replace the government’s flagship Help to Buy scheme, which has now closed to new applicants.
Help to Buy was just one of the ways the government made homeownership more achievable and affordable, helping over 350,000 young people and families into homes. Applications for a Help to Buy: Equity Loan closed at 6pm on Monday 31 October 2022 and you must legally complete the purchase of your home by 31 March 2023. If you don’t complete by this date, you will not be eligible for the equity loan. While there won’t be a new help to buy scheme, there are lots of alternatives which our latest article explores.
Government’s Shared Ownership scheme
Shared Ownership is a government scheme that aims to make it easier for buyers to get on the property ladder through part owning/part renting. Essentially, the buyer pays a mortgage on the percentage of the property that they own and pays rent on the remaining amount. This means that the deposit they put down tends to be a lot lower than it would be if they were to purchase the entire property outright. This has made Shared Ownership a popular choice for those that are struggling to save large enough house deposit or have been priced out from buying.
Over time, the buyer has the option to increase their ownership stake in the property. This means they could eventually buy the property outright, and not have to pay rent.
First Homes Scheme
First launched in June 2021, the First Homes scheme is an initiative involving first-time buyers, key workers and local people. The scheme allows those who fit the criteria to purchase a new build property at a 30-50% discount to the market value. When said buyers eventually decide to sell, that discount is passed onto the next buyer as well to encourage a continuing chain of opportunity for first-time buyers to buy affordable homes.
The scheme is still in its infancy with only a handful of developments currently available. However, with the end of Help to Buy almost upon us – First Homes could see an increase in both availability and popularity as we head into 2023 and beyond.
Guarantee mortgage
If you’ve diligently saved enough for a house deposit but don’t earn enough to be approved for a mortgage on your own, a guarantee mortgage is an excellent first-time buyer mortgage option. Also called a joint borrower, sole proprietor mortgage, it means you will be the only owner of your home, but your parents will boost your borrowing power. It’s ideal for those with a good salary who can confidently afford repayments, but don’t have much choice with the ‘four times your earnings’ borrowing limit.
These mortgages can have higher rates, but it may be worth the trade-off to get on the property ladder as a single person.
Lifetime ISA
A Lifetime ISA (LISA) lets you save up to £4,000 every tax year towards a first home or your retirement, with the state adding a 25% bonus on top of what you save. That means you could get a chunky £1,000 of free cash annually. Plus you earn interest on whatever you save, and as it’s an ISA, that interest is tax-free.
For more advice for first time buyers in 2023 and any other mortgage requirements, please contact us here.
