Five ways to get your ftb clients on the ladder
By Brad Rhodes, Corporate Account Manager at Platform, part of the Co-operative Bank
Your first-time buyer clients have plenty of barriers to getting on the property ladder, not least saving a deposit. But there are diverse homeownership solutions on offer from the government, housing associations and lenders, including new options such as the Mortgage Guarantee Scheme and Help to Buy 2021-23.
Make sure your knowledge of all the new schemes and mortgages is up-to-date with this refresher:
1. Help to Buy Equity Loan (2021-23)
Help to Buy Equity Loan (2021-23) replaces the Help to Buy scheme that’s been running since 2013, but from next week it’s only available to first-time buyers. Regional price caps will also apply to ensure the scheme only helps those who really need support to buy a home.
As before, this is a shared equity scheme. The borrower needs at least a 5% deposit and the government will offer an interest-free equity loan for five years up to 20% of the property’s value (40% in London).
The remainder is borrowed as a mortgage and many lenders are supporting the scheme, including Platform.
2. Mortgage Guarantee Scheme
A new Mortgage Guarantee Scheme will be launched in April to boost the number of 95% mortgages to borrowers with just 5% upfront.
The government-backed mortgages aim to remove one of the biggest barriers to homeownership – saving a big enough deposit. The scheme will be available to homebuyers taking a residential mortgage on their sole residence, so it can’t be used on a buy-to-let or second home.
They can be taken on a property purchase up to £600,000, where the borrower has a deposit of between 5% and 9% of the property’s value and borrows 91% to 95% as a repayment mortgage.
Of course, your client still has to meet the affordability criteria of the lender, including credit score, stress test and maximum loan to income ratios, which may restrict accessibility of these mortgages in practice.
3. First Homes Scheme
The government’s First Homes Scheme is designed to help local first-time buyers by providing discounts of at least 30% on new-build properties in their area compared to market prices.
The discount applies in perpetuity so future buyers of the property, and the community as a whole, will be able to benefit. Every time a First Home is resold, the discount will be passed on to the next generation of homeowners.
First Homes will be subject to household income caps of £80,000 across England and £90,000 in London.
Initially the government will secure First Homes through the current system of section 106 planning obligations, where a resale price covenant is attached to the sale, although planning reforms aim to simplify this and support their delivery.
4. Shared Ownership Schemes
The Government’s new Right to Shared Ownership model will make it easier for clients to buy a home in stages.
The buyer purchases a percentage of the property, with the remainder owned by a Housing Association or Local Authority. The homeowner usually pays reduced rent on the portion they don’t own with the option to purchase further
shares as and when they can afford to.
Under the new Right to Shared Ownership model housing association, tenants moving into new homes will be given the chance to buy a share with a stake of just 10% and proceed to buy their home in 1% chunks – rather than the current minimum of 10% at a time.
5. First-time buyer mortgages
Lenders offer a wide range of innovative lending solutions to first-time buyers, from guarantor-style mortgages to joint applicant sole title arrangements and high LTV homeloans.
At Platform, we champion first-time buyers and worked hard last year to maintain a presence in the high LTV lending sector.
Four in 10 of our mortgages last year went to first-time buyers, as we explained in First time buyers will be vital to our business in 2021. We’re committed to helping this vital sector of the housing market achieving their homeowning goals.
Whether your client has a small deposit, wants to take advantage of Help to Buy, or is a professional who would like to benefit from extended income multiples of 5.5 up to 90% LTV, we can offer a solution that meets their needs.
