What schemes are there for first-time buyers?

Diane Fish is an Independent Financial Adviser with Smith & Pinching, Chartered Financial Planners Picture: Smith & Pinching (Image: Archant)

My partner and I have been renting for four years but feel ready to get on the housing ladder – especially with the current Stamp Duty holiday. However, we don’t have a huge amount to put down as a deposit so we’re worried that we won’t be able to get a mortgage. I think there are schemes to help first-time buyers, aren’t there? How much will we need? We both earn about £25,000 a year and have about £20,000 in savings.

Diane Fish of Smith & Pinching responds:

The mortgage market has seen some ups and downs over the last few months and lenders are, not surprisingly, being cautious about lending to those with low deposits. In my experience, there are mortgages available for 90pc to 95pc Loan to Value (LTV). As a general comment, though, the higher the LTV, the harder it is to obtain a loan.

Mortgage lenders base their decisions on affordability rather than a straightforward salary figure, so it would be a case of analysing your income and expenditure plus the situation regarding your jobs – including what happened to your jobs during lockdown.

There are a few government-backed schemes to help you buy your first home that fall under the general banner of Help to Buy initiatives. The Help to Buy Shared Ownership scheme gives you a chance to buy a share (between 25pc and 75pc of your home) using a mortgage, and pay rent on the share you don’t own. Properties available under this scheme are normally either new builds or resale properties from housing associations. They will be offered on a leasehold basis. Some of the older Shared Ownership schemes allow you to ‘staircase’ up to a 100pc ownership. The borrower needs to pay a £1 monthly management fee by direct debit.

Another type is the Equity Loan scheme. This is available to those buying new builds and provides a government loan towards your deposit of 20pc of the cost of the property. You would then be required to provide a further 5pc for the deposit and to arrange a mortgage for the remaining 75pc. The government loan has no charges for the first five years that you own the property. It is important you fully understand the repayment conditions when considering these types of loans.It’s worth mentioning that even before the Stamp Duty holiday was introduced, first-time buyers could take advantage of a 0pc rate of Stamp Duty Land Tax for any property up to the value of £300,000.

I recommend that you speak with an independent mortgage adviser who will help you work out what size of mortgage might be available to you in the current climate.

Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.