Helping hands from Government or bank of mum and dad
The amount you pay will depend on the value of the property you are buying.
Up to £125,001 …Rate 0 per cent; £125,001 – £250,000 …Rate 1 per cent; £250,001 – £500,000 … Rate 3 per cent; £500,001 – £1,000.000 … Rate 4 per cent; £1,000,001 or more … Rate 5 per cent. With effect from 24/03/2010 (Budget 2010), the Government introduced a scheme where first time buyers won’t have to pay stamp duty on properties up to £250,000 before 24/03/2012. However with lenders reluctant to provide higher LTV mortgages and the problem of getting a large deposit has meant the results are nowhere near as effective as hoped.
Whilst Stamp Duty will not have a direct impact on what you can borrow, it is something that needs to be considered as a cost. If you are struggling to get a deposit together and have to set aside some of your savings for costs, this can have an impact on your Loan to Value as you may have less of a deposit than you thought.
This centres on a new build indemnity scheme which will allow buyers to secure loans on newly-built homes with just a 5 per cent deposit – with the Government and house builders helping to provide security for the loans.
Affordable housing providers will also get £1.8bn in funding to develop new homes. The first £1bn of contracts have already been confirmed, putting the Government on track to deliver up to 170,000 new affordable homes across the UK over the next four years. For existing builds that have stalled due to economic conditions, a £400m ‘Get Britain Building’ funding pot will enable house builders to restart construction, creating up to 16,000 new homes on sites that already have planning permission too.
Support will also be offered to self–builders, with £30m additional funding going to support provision of short–term project finance on a repayable basis. However the sourcing of these schemes and qualifying criteria can be very difficult. So whilst initiatives are always welcome, the rules can be somewhat less welcoming.
It’s never been a better time to buy but ironically first–time buyers are rarely seen through estate agents doors with the UK housing market having fallen to a three-year low.
But financial assistance from parents can be a big help and it doesn’t have to mean handing over their life savings!
A cash gift is normally the most obvious solution but not necessarily the easiest or preferred option for parents. There are options that allow parents to invest in a savings account with the mortgage lender a sum of money equivalent to the deposit required. The lender then restricts any withdrawals from this account until the first-time buyers can meet certain criteria or can re–mortgage to a different lender at a later date. The parents get their money back and have helped secure ownership of a property for their children.
Another way is for a parent or parents to co–sign on a mortgage application with their children, similar to the perception of a guarantor. This will not require any additional money for deposit, thereby safeguarding the parents own savings, but does provide additional security for the would–be lender.
There is of course qualifying criteria to be met for both the borrower and the parents, Different lenders will have a different approach to this scenario and not every lender will offer this as an option.