Guide to saving for a house
Need some help on how to save for a house? In this brief guide, we’ll get you started on the road to being a homeowner.
Opening the door to home ownership
The costs of buying a home can sometimes be pretty daunting. As well as saving for your deposit, there are many other moving expenses to think about too.
If you’re finding it tough to put enough money away, don’t worry. There are still plenty of routes you can go down to make home ownership a little easier.
95% Mortgage Guarantee Scheme
The 95% Mortgage Guarantee Scheme was introduced by the UK government in 2021, after 95% mortgages virtually disappeared from the market during the COVID-19 pandemic.
To give lenders confidence in these higher risk loans, the government guarantees the portion of the mortgage over 80%. In essence, that means they would partly compensate the lender if you failed to pay your mortgage.
The scheme is open to both first-time buyers and movers. It’s available on properties up to £600,000.
Zero-deposit mortgages
A zero-deposit mortgage, also known as a 100% no-deposit mortgage, is a loan for the full purchase price of the property you’re buying.
Normally, you would put down a deposit (typically 10% of the property price) and borrow the rest from a mortgage lender.
As it currently stands, there are very few zero-deposit mortgages available on the market. You'll also need to have a good track record of paying your rent if you are to succeed with an application.
Shared Ownership Scheme
The government’s Shared Ownership scheme offers another route to owning your own home - or at least part of it.
If you can’t quite afford the deposit or mortgage on 100% of a home, the scheme allows you to buy a share of one (between 25% and 75% of the home’s value). You then pay rent on the remaining share. Later down the line, you can buy a larger share if you can afford it.
The scheme isn’t available to everyone. Your household will need to be earning less than £80,000 a year if you live outside London, or less than £90,000 a year if you’re in London.
There are also variations of the scheme designed to support older people, or those with disabilities.
Older People’s Shared Ownership
The Older People’s Shared Ownership scheme applies to those aged 55 or over. It works largely the same way as the main Shared Ownership Scheme, with one key difference.
In this scheme, you can only buy up to 75% of your home. But once you own 75%, you won’t have to pay rent on the remaining share.
Home Ownership for People with Long-Term Disabilities (HOLD)
Properties available through the Shared Ownership scheme may not always be suitable for people with disabilities. For example, you may need a ground-floor property, which may not be available on the standard scheme.
That’s why the HOLD scheme exists. It can help people with long-term disabilities buy any home (outside of the scheme) on a shared ownership basis.
Like the main shared ownership scheme, it is means tested. So your household must be earning less than £80,000 a year outside London, or less than £90,000 in London.
The Bank of Mum and Dad
It may not be an official scheme, but plenty of first-time buyers get a helping hand from their family. Whether it’s a generous gift or a ‘mates-rates’ loan, it can make a big difference to your ability to buy.
Sometimes, there’s even the option of a family mortgage, designed for parents to help their children onto the housing ladder.
If you do get some financial support from your family, just be clear with your mortgage lender as to whether the money has been gifted or lent. If you’re borrowing the money, the bank will need to factor in your ability to pay it back, alongside your mortgage repayments.
Remember, when you’re ready to discuss mortgages, Wesleyan Financial Services can help you find a great deal from a range of providers.
Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
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