With the Help to Buy scheme no longer available, aspiring homeowners may be wondering what other options exist to help them get onto the property ladder. This article outlines some of the main alternatives to the Help to Buy scheme, making it easier for you to navigate the UK housing market and find a path that works best for your situation.
Shared ownership is a popular alternative for those who cannot afford to buy a home outright. Under this scheme, you purchase a share of a property, typically between 25% and 75%, and pay rent on the remaining portion. Over time, you can buy more shares in your home, ultimately owning it outright. The scheme is open to first-time buyers, those who have previously owned homes but can’t afford to buy one now, and existing shared owners looking to move.
First Homes Scheme
This scheme is designed to help first-time buyers, and in some cases, key workers, to buy a home in their local area for a discount of 30% compared to the market price. In some cases, local authorities may increase the discount up to 50%. This discount would then be passed on to future buyers to keep the homes affordable for local residents and first-time buyers in perpetuity.
A lifetime ISA (individual savings account) is a savings product that allows you to save up to £4,000 a year towards your first home (or your retirement), with the government adding a 25% bonus to your savings, up to a maximum of £1,000 per year. This scheme is open to UK residents aged between 18 and 39. It’s a great option if you’re looking to save for a deposit over a longer period.
Help to Build
It’s intended to provide an equity loan on self and custom build homes, similar to the Help to Buy scheme, which provides an equity loan on new build properties. Under the planned Help to Build scheme, people looking to build their own home could potentially apply for a lower deposit mortgage, with the government providing a portion of the equity loan. This is also anther alternative and intended to lower the size of the deposit required and make the process of building a home more accessible.
Right to Acquire
The “Right to Acquire” is a scheme offered in the UK that allows eligible housing association tenants to buy their home at a discount. It’s similar to the “Right to Buy” scheme, but is specifically for housing association tenants rather than local authority tenants.
Rent to Buy
Rent to Buy is a scheme that allows tenants to rent homes at approximately 20% below the market rate for a fixed period, usually between five and seven years. This reduced rent enables tenants to save for a deposit to purchase the property at the end of the rental period. It’s an excellent option if you need more time to build up a deposit but are eager to get onto the property ladder.
Lend a Hand Mortgages
Some lenders offer Lend a Hand mortgages, where a family member deposits money into a savings account linked to your mortgage. This cash serves as security for your mortgage, enabling you to borrow more than you would ordinarily be able to. It’s an excellent option if you have a family member who wants to help you get onto the property ladder but can’t afford to give you a large cash gift.
Bank of Mom and Dad
If you’re fortunate enough to have family members who can help you out financially, they might be able to lend or gift you money towards a deposit. There’s no formal scheme for this, but it’s a common way for people to get onto the property ladder. Be aware, though, that there can be tax implications for both parties, so it’s important to seek financial advice before going down this route.
A 95% mortgage refers to a mortgage loan where the borrower finances 95% of the property’s value, with the remaining 5% provided as a down payment. In other words, the loan-to-value (LTV) ratio of the mortgage is 95%.
100% / Track record mortgages
Track record mortgages” or “rental track record mortgages” refer to mortgage lending policies that allow prospective buyers to use their history of rental payments as evidence of their ability to repay a mortgage. This approach can be particularly beneficial for first-time homebuyers who may not have a substantial credit history but have consistently made rental payments on time.
With the Help to Buy scheme no longer available, it’s essential to explore the many other options that can help aspiring homeowners get onto the property ladder. Shared ownership, First Homes scheme, Rent to Buy, Lifetime ISA, Help to Build Initiative, Lend a Hand mortgages, financial help from family, the Right to Buy scheme, track record mortgages, and the Right to Acquire scheme all provide viable alternatives for those looking to buy a home in the UK. Each option has its own set of advantages and disadvantages, and the right choice for you will depend on your individual circumstances. Therefore, it’s crucial to do your research and seek professional advice before making a decision.