The housing market is an inhospitable place for young first time buyers. It requires a dedication to an end goal that borders on single minded and many sacrifices along the way. Are young people up to the challenge?
Save: It’s a simple first step, but it’s the one that most buyers struggle with the most. Putting a little away here and there simply won’t cut it, you need to be consistently squirrelling away money, sacrificing holidays and big money spends, in an attempt to scrape your deposit together.
Fortunately, there is help out there. Do some research and find a savings account with the best interest rate. The most popular savings account for first time buyers at the moment is the Help to Buy Isa.
This account allows you to make monthly deposits of up to £200 until you either buy your first home or reach the £12,000 limit. Once you actually purchase a home, you can use the savings from your Help to Buy ISA towards the deposit and after the sale is complete you will a 25% bonus from the government. For example, if you had £12,000 saved, you would receive a £3,000 bonus after completion.
What are your options?
0% mortgage: A 0% mortgage is similar to a 5% mortgage, in that a guarantor must put forward 10% of the deposit, whilst you put down nothing. The guarantor will receive the cash back, provided you keep up with the mortgage repayments.
Rent to Buy: Rent to Buy is a new scheme that allows you to choose a home that you will one day buy, and pay a reduced rent (80%) so you can save the other 20% for a deposit. Once you enter the scheme, it lasts for five years. During that time you can buy the property, or you can pay for a 25% or 75% share of the property.
Starter Homes: Starter homes are a new scheme designed to encourage first time buyers and property developers to come together in aid of the property market. First time buyers between the ages of 23-40 can apply to be a part of the scheme. They will essentially be given a 20% discount on the value of a new build home up to the value of £250,000.
Bank of Mum and Dad: When all else fails, what better place to go than the good old reliable bank of mum and dad. Many of the options above require your parents to act as a guarantor anyway, so why not just go straight to the source?
Whilst it might seem daunting to begin saving for a property, there are many options that can help you take your first tentative steps onto the property ladder. Do some research and find out which options suit you best.