What Does Buying a House Chain Free Mean
When buying a house, the term “chain-free” may not sound important, but it actually carries significant weight when buying and selling homes. But what...
As a first-time home buyer about to get on the property ladder, you may well feel excited and nervous at the same time.
04 November 2022
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As a first-time home buyer about to get on the property ladder, you may well feel excited and nervous at the same time. And rightly so, as buying a house is probably the most expensive financial transaction you will do in your life. They don’t teach getting on the property ladder in school so the only way we have to learn as first-time buyers is often through trial and error. It’s easy to feel daunted, especially in a hot market when you compete with home movers and investors.
But your position as a first-time buyer is one of the strongest positions you can be in when buying a house. Here is how:
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When you are buying a house for the first time you get stamp duty relief up two £425,000 on any property up to the value of £625,000. That means you will not have to pay stamp duty on any amount up to £425,000. But, if you have ever owned a property, including through inheritance or you are buying with someone who has owned a property this does not apply, unfortunately.
If you can’t afford the deposit and mortgage repayments to buy the property you want, then you could consider a shared ownership scheme. This is where you can buy a proportion of the property up to 75%. You then pay rent to the provider on the rest. The benefit of shared ownership is that you need less money to buy. Also, the loan is interest-free for the first five years. However, if the housing provider owns 20% of the property initially when you come to sell, they will still be entitled to 20% of the value, so this is something to bear in mind.
The Government First Homes Scheme offers eligible first-time buyers in England the opportunity to buy a home for 30% to 50% less than its market value. This applies to a new home or a home originally bought as part of the scheme. One thing to bear in mind is that you can only sell the home to someone who is eligible to buy a First Home and you must give them the same percentage discount that you got, based on the home’s market value at the time of sale.
In April 2021, the Government launched an initiative called the Mortgage Guarantee Scheme, meaning you can put down just a 5% deposit and the Government will provide a guarantee to mortgage lenders on the portion of the mortgage between 80% and 95% of the property value. The current scheme is subject to participating lenders and is due to end in December 2022, although some lenders have urged the Government to continue the scheme.
For most Government Schemes, eligibility criteria apply so visit the Government website for more details on the schemes listed.
One of the things most attractive to sellers is when there is no chain. As a first-time buyer, you have no property to sell, which means the buying chain is smaller, with fewer people in it, which in turn means there is more chance of a quicker completion. The second benefit to not being in a chain is the chances of the sale falling through are drastically reduced.
Chances are that, as a first-time buyer, you will be living at home or renting. This means that you can be more flexible than someone who is selling a property. For example, the seller may need a specific date to move, such as when they have childcare. You may even be able to use your chain-free position to get a lower offer than the property asking price accepted on your dream home.
One of the best ways to save money for a deposit is by opening a Government Lifetime ISA. You can use this savings account to save up to £4000 per year and the Government will top up your annual savings by an extra 25%. Another benefit is that you don’t pay tax on any interest your savings make. A Lifetime ISA can be opened between the ages of 18 and 39.
Now all that’s left for you is to find the home you want to buy!
If you have any questions, please get in touch with Propertyable today. For more information about buying a house as a first-time buyer, follow this link to learn more.
From mortgages and insurance to viewings, offers, exchange and completion, our Buyers’ Guide will take you through everything, step by step, from start to finish.
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