Full list of freebies that first-time buyers can get to help buy a house including mortgage holidays and cash
BUYING your first home is a huge, and expensive, decision but there could be ways to save thousands.
Free money can bump up your deposit or ease the costs of buying.
The average first-time buyer with a 20% deposit now faces mortgage payments of up to 39% of their take-home pay, according to Nationwide Building Society.
A previous peak was seen towards the end of 2007, when the proportion was 46%, according to the analysis.
Andrew Harvey, a senior economist at Nationwide, said the trend of rising mortgage rates started towards the end of 2021.
It comes as market interest rates that underpin mortgage pricing rose steadily.
This reflects expectations that the Bank of England would have to raise rates significantly in the years ahead to help bring surging inflation back to its target rate of 2%.
Inflation stood at 10.7% in December – a fall from a 41-year-high of 11.1% a month earlier.
Raising a deposit is also a major hurdle for first-time buyers.
Mr Harvey added: “Between the start of the pandemic and the end of 2022, house prices increased by 19%, while incomes rose by a much more modest 9%.”
If you’re a first-time buyer and you’re feeling a little overwhelmed, don’t worry because there are schemes out there to help.
Below, we share tips and tricks to help you get your hands on extra cash for your first home.
Mortgage holidays
First-time buyers currently have the chance to buy a house and not pay a mortgage for 10 months.
This applies if you reserve a new Persimmon home by January 31.
The move is intended to free up each customer’s cash to help with the cost of living.
The mortgage holiday incentive is capped at 5% of the agreed sale price.
For example, if your new home costs £245,000, Persimmon will pay up to £1,225 in your mortgage payments for 10 consecutive months.
The 5% discount is the maximum that a developer is allowed to contribute to a customer securing a mortgage – so if your house costs more than the average, it may not cover your whole monthly bill.
But be aware that the offer is available on selected developments and plots only.
The scheme is not open to those who purchase a property with a buy-to-let mortgage or those whose property was purchased using the First Homes Scheme or through a Discount Market Sale.
The support is different to mortgage holidays given to existing homeowners who are struggling to make their payments.
It is an agreement between you and your lender that allows you to temporarily stop or reduce your monthly mortgage repayments.
Not all mortgages offer the option of a mortgage payment holiday – it depends on the product’s terms and conditions.
It’s important to note that you’ll still accrue interest, meaning it’ll cost you more to pay off the mortgage in the long run.
It will also show up on your credit file and might affect your credit score.
Stamp duty holiday
Stamp duty is a payment you’ll need to make if you’re buying a property or piece of land.
First-time buyers currently don’t have to pay any stamp duty on homes costing less than £425,000.
They only have to pay it on properties costing more than this.
The maximum value of a property on which first-time buyers can claim relief is £625,000.
You pay the tax when you:
- buy a freehold property
- buy a new or existing leasehold
- buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
The rate a buyer has to fork out depends on the price and type of property.
Rates of Stamp Duty are different in Scotland and Wales.
Savings account bonuses
A lifetime ISA is a government-backed saving scheme that provides a cash bonus that can be used to buy a first home or for retirement.
You can put in up to £4,000 a year with the government adding a 25 per cent top-up worth up to £1,000 a year.
The accounts are used by many first-time buyers, but you need to be a long-term saver to get the full benefit.
The savings can be used by a first-time buyer once the account has been held for 12 months.
So, if you are hoping to buy a home before then, the account will not be suitable.
Also, keep in mind you will have to pay a 25 per cent withdrawal fee if you take the cash out for any other purpose than buying a first home or a pension.
If you’re using the savings as a first-time buyer, keep in mind the property must also cost less than £450,000.
The Sun recently spoke to one first-time buyer who managed to bag £4,000 free cash from a Lifetime Isa to put towards her £376,000 home.
Developer incentives
If you’re buying a new home, some developers might give you cash or other freebies as part of an incentive package.
The Sun spoke to a couple who got their carpets and flooring for free from their developer when they moved into their first home.
Some builders have been known to offer up to five per cent towards a deposit or pay for the stamp duty of a buyer.
The level of cash available depends on the developer and ultimately how keen they are to make a sale.
If you want a new build home, it’s worth haggling with the builder to see how much you can get – whether that’s cash or other freebies – before agreeing to a sale.
Bear in mind that new homes have a premium that makes them more expensive than other homes where your money may go further.
High interest
When pulling together a deposit, look around for the accounts that will give you the greatest rewards for your cash.
When saving it’s important to find the best savings rate – generating the most interest is in effect free money towards your deposit.
Rising interest rates mean savers can now get better returns, so be prepared to move money around to take advantage.
Before you start saving, it’s a good idea to get a target goal based on your own situation.
Talking to a mortgage broker at the outset means you can find out how much can borrow and subsequently the sum you need for a deposit.
Here’s how one couple got £11,000 off their deposit for their £217,000 first home.
Another family is saving thousands on their £385,500 first home with a simple mortgage trick.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk