First-time buyers – the options

Sarah Barnes - March 28th 2019

There are plenty of incentives currently in place for first time buyers hoping to take their first step on to the property ladder.

At Napthens we regularly act for purchasers who receive contributions towards their deposit, mainly from close family members. These contributions are usually treated as ‘gifts’ which the mortgage lender will need to approve.

Of course, not everyone has access to this type of assistance – but there are now a number of ways in which would-be first time buyers can get further help.

For those family members or close friends who cannot afford to simply gift a sum of money towards the purchase of a property, they can contribute by way of a ‘springboard mortgage.’ This means that the purchaser does not have to find a deposit, but instead, the family member or friend can provide 10% of the property purchase price as security. The money is paid into a separate account with the bank, and earns interest over a period of time.

As well as checking details of the mortgage offers your current bank has in place, it is also prudent to speak to an independent mortgage broker, one which has access to the whole of the market, to ensure you are aware of all of the options out there – and information on any new schemes which could assist.

The government Help to Buy schemes have been a hot topic of conversation recently, with first time buyers having the option to obtain a Help to Buy equity loan or Help to Buy ISAs.

A large proportion of our first time buyers have enlisted the help of these government schemes. It is extremely important that as a first time buyer, you are familiar with the details of these schemes. The government has made lots of information available to try to ensure there is no confusion regarding eligibility. For instance:

in order to qualify for a help to buy equity loan, the property needs to be new build; have a purchase price capped at £600,000 (£300,000 for Wales); be the only property to be owned and not be sublet or rented out after the property has been bought.

As well as Help to Buy, shared ownership is an option, whereby you can purchase a 25 – 75% share of a property, with the Housing Association owning the rest. You would then arrange to pay rent on the share owned by the Housing Association. These types of property are leasehold, and you will need to ensure that you are comfortable with the obligations set out in the lease. Again, you will need to check your eligibility for this type of property, as there is criteria which you will need to meet.

At Napthens we are experts in advising first time buyers in relation to any of the options mentioned above – and we are able to provide clear advice in connection with the purchase of leasehold properties.

Please be aware that any lawyer advising the first time buyer would not also be able to advise a family member or friend providing any financial assistance. In these situations, those individuals would need to take separate, independent legal advice if assistance is required. It is worth setting this up at the outset, in order to avoid any delays later on.