First-Time Buyers Should Be Thinking Longer Term When Purchasing
2 minute read
Introduced in 2013, the government-backed Help to Buy: Equity Loan* scheme supported the purchase of nearly 300,000 new homes in England with a minimum 5%
deposit and an interest-free loan over 5 years for up to 20% of the property’s equity (40% in London) with funding topped up by a residential mortgage.
82% of purchases were houses and just 18% flats; under the current scheme, only first-time buyers are eligible.
According to the Office for National Statistics (ONS), the average house price now stands at £249,000, and the equity loan can be used for properties worth up to £600,000, with regional price caps.
Whilst the scheme has proved popular, first-time buyers need to plan for making interest payments on the original loan from the 6th year. In the event of selling or the equity loan term coming to an end, whichever comes first, the government would be entitled to take 20% of the sale price of the property value.
A brand-new property should offer high construction and the latest environmentally friendly standards, so the major developers are keen to promote Help to Buy.
However, first-time buyers should accept that ‘new’ typically carries a premium, and explore other options which may offer better value; second-hand properties may need updating or redecorating, but could be better suited to the longer term, with prices more competitive. Provided the surveyors’ inspection doesn’t identify any structural issues, mortgages are usually available at favourable rates, taking into account any planned works and buyers’ personal financial circumstances.
With climate change, some locations are becoming vulnerable as ‘flood zones’, so it is worth taking advice from an Environmental and Planning specialist before making a commitment to purchasing any property. Most local authorities will have updated information.
The housing market currently faces strong demand, but don’t risk rushing a purchase; think about your future, when you will have outgrown a one-bedroom flat and want more space. Working from home will likely remain part of our lives out of both choice and necessity, as well as convenience; sitting at the kitchen table with your computer isn’t a lifetime solution!
Whatever your plans, having a mortgage agreed in principle as you start a property search gives you flexibility and enables you to target specific price ranges and locations. Our advisers at Just Mortgage Brokers are available to point you in the right direction.
*Help to Buy: Equity Loan is available subject to eligibility, terms and conditions.