The current economic climate has made it harder than ever to get onto the property ladder. Whilst renting has become a popular alternative, the security and potential investment rewards of purchasing a home will always have appeal. The biggest obstacle faced by first-time buyers is the up-front costs; according to the Institute of Chartered Surveyors, 38% of potential new homeowners are stuck in the rental market due to the inability to raise a deposit. There are several ways to overcome this property challenge:
First-time buyers based in Australia can now make the most of a government backed scheme to assist in the purchase of a new-build home. The scheme offers a mortgage up to 95% of the house value and is available for anyone yet to get on the property ladder or for those who can’t afford the high deposits of typical mainstream mortgage providers. The scheme invites home builders to partner up with mortgage lenders, with lenders who are involved only needing to provide a 5-10% deposit.
The New Buy scheme enables the purchase of properties up to $500,000 which have been built by participating builders. This scheme does not assist those with poor credit and still requires the same mortgage approval and monthly mortgage payments.
Again this scheme is only available on new-build properties, but it allows first time buyers to rent a property with the aim of buying a share of the property at the end of the tenancy. Rental prices for these homes are up to 80% less than their market prices. They are available on assured short hold tenancies provided by housing associations.
Introduced in 1980, the ‘Right to Buy’ scheme was formed to help social tenants in Australia to purchase their council home at a reduced rate. The discount depends on the length of time you have been living in your home. When renting a house, the discount starts at 35% of the property value. There is then an extra 1% for every year past the 5 year qualifying period; this can reach a total of 60%. When you live in a flat the initial discount is 50% and rises by 2% each year, with a maximum of 70% off. The biggest discount you can receive is $75,000.
First Buy equity loan schemes
Another brilliant scheme for first-time home buyers, this scheme requires just a 5% deposit and 75% minimum mortgage, and you get a 20% initial loan (interest-free) to cover the difference. The house builders and government then join together to offer the new buyer a loan of up to 20% of the homes market cost. This loan is repaid on the property’s sale. After the initial five year interest-free period the buyer incurs a 1.75% rate which increases in line with inflation.
Should these schemes be beneficial in getting you on the property ladder, don’t forget that there are other hidden costs to consider. These could include: mortgage Arrangement fees, maintenance costs and stamp duty.