FINANCE YOUR HOME MOVE
Whether you’re a first-time buyer, moving into your ‘forever home’, looking to help family members onto the property ladder, or want to find ways to cash in on the value of your home, our guide to the schemes and products available will help…
Getting a first foot on the property ladder isn’t easy but there are plenty of potential ways to find assistance.
If you’re aged 18-39, you can take out a Lifetime ISA (LISA) – a savings account specifically to help you save for a first home (which must cost under £450,000) or for retirement.
You can stash up to £4,000 per tax year into your LISA every tax year until you’re 50 and the Government will top it up with a 25 per cent bonus. But be warned: if you withdraw the funds before buying a house or retiring, then you will lose the bonus and be charged a 25 per cent penalty, meaning you could end with less than you started with. See gov.uk/lifetime-isa for more.
On this scheme, you are able to buy anything between 25 per cent and 75 per cent of a property – and then pay reduced rent on the rest. You’ll need at least five per cent of the property price for the deposit and a mortgage for the part you’re going to own.
HELP TO BUY: EQUITY LOAN
Interest-free for the first five years, the Help to Buy: Equity Loan allows you to borrow 20 per cent of the property price (up to 40 per cent in London) for properties costing up to £600,000. You’ll need a mortgage and a five per cent deposit for the rest. Find out more at helptobuy.gov.uk.
Family mortgages, such as the Barclays Family Springboard or Halifax Boost, allow a family member or friend to help first-time buyers with their deposit. Generally, this works by them putting 10 per cent of the purchase price of the house into a fixed term savings account as a guarantor, for a set amount of years. As long as the purchaser doesn’t default on mortgage payments, they get their money back with interest. There are a number of different types of products available so it pays to do your research.
MOVING ON UP
If it’s time to move because you need a bigger place or are planning to relocate, you could either take your existing mortgage with you (known as porting) if you’re already on a great deal, or you could take the opportunity to remortgage. Porting means you have to repay your mortgage and then continue with the same terms and conditions on your new property – but you have to reapply for it and there are no guarantees your lender will allow you to do it. It will still be subject to legal fees and stamp duty. If, however, your deal’s almost coming to an end, or you’re moving to a more expensive property, then it’s worth seeing an independent mortgage broker to help you scour all the potential options. You can find one at unbiased.co.uk or vouchedfor.co.uk.
PROPERTY RICH, CASH POOR?
If you’re over 55 and a homeowner, releasing equity from your house might be on your radar. How much you can borrow depends on the lender, your property value and your age.
The most popular type of equity release is a lifetime mortgage. This enables homeowners to borrow against the value of their property, either taking a lump sum or regular withdrawals. There are no monthly repayments, the interest (typically around five per cent, but some are as low as three per cent) rolls up and is added to the loan. The loan plus interest accrued is only paid back when the homeowner goes into long-term care or dies, although many lenders will allow you to make ad hoc repayments to control the size of the overall debt.
Equity release is an expensive way to fund your retirement or help family, especially if you have other more appropriate options for your long-term financial planning, such as downsizing. Talk to your family before approaching any equity release company, find an independent financial adviser who specialises in retirement planning or visit the Society of Later Life Advisers (societyoflaterlifeadvisers.co.uk).