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Help To Buy: How To Get On The Property Ladder In London

August 2, 2017

Most of today’s young Londoners think of home ownership as an impossible dream. But is it?

From new ISAs and Help to Buy, to buying with friends and shared ownership, you no longer need an unimaginable sum of money sitting in the bank to buy property. Here’s our lowdown on the latest initiatives and ideas to help you get on the property ladder in London.


Shared Ownership

What is it?

A popular scheme allowing you to buy 25% - 75% of a property using a deposit and a mortgage, and rent the remaining share. The rent you pay can be up to 3% of the housing association's share of the property's value.

The good news is that the deposit needed is only 10% of the share you buy, not the whole amount, making it much more achievable for most young Londoners.

For example, if wanted to own a 25% share of a £200,000 property - £50,000 - you would need a £5,000 deposit. The housing association would only be able to charge rent on the £150,000 share that it owns. This would be a maximum of £4,500 over the year, or up to £375 a month.

You can choose to buy a bigger share when you can afford to - this is called ‘staircasing’.

Selling a Shared Ownership home

You can sell a shared ownership property at any time, and will benefit from any increase in value it's seen since you bought. However, the housing association has the right to try to find a buyer before you put it on the open market.

Who qualifies?

  • Your household earns £90,000 a year or less in London
  • You don’t own any property

How to apply?

Check your eligibility for a Shared Ownership scheme on the First Steps website.


1 bedroom, 1 bathroom | Northbrook Road, Cranbrook, IG1

£230,000 (Leasehold)

Property For Sale Northbrook Road


1 bedroom, 1 bathroom | Montalt Road, Woodford Green, IG8

£290,000 (Leasehold)

Help To Buy London


Help to Buy: ISAHelp To Buy ISA

What is it?

This really is free money! Set up an account and you can save up to £1,200 in your first month, then up to £200 a month after that - though the amount you put in each month is completely up to you.

When you come to use the funds to buy your first home, (you can't take it out before then!) the government will top up your savings with a 25% bonus (up to a maximum of £3,000).

Who qualifies?

  • You need to be a first-time buyer
  • You must be aged 16 or over
  • You can use the funds to buy any home worth under £450,000 in London
  • You can use a Help to Buy ISA with any mortgage

Who doesn’t?

  • You can’t use a Help to Buy ISA if you’re going to rent out the property
  • You can’t use a Help to Buy ISA on an overseas property
  • You can’t have more than one Help to Buy ISAInstant Valuation

When is it available until?

Help to Buy ISAs are only available until the 30th November 2019 - so make sure to set up an account soon! From that date onwards, they won’t be available to new savers, but if you opened your Help to Buy ISA before then you can keep saving into your account.

How to apply?

It depends which bank you want to set up an ISA with. Most will allow you to open an ISA online within minutes.  


1 bedroom, 1 bathroom | Greenacre Gardens, Walthamstow, E17

£249,950 (Leasehold)

Flat For Sale Walthamstow


1 bedroom, 1 bathroom | Overhill Road, Dulwich, SE22

£275,000 (Leasehold)

Flat For Sale Dulwich


1 bedroom, 1 bathroom | Morieux Road, Leyton, E10

£325,000 (Leasehold)

Flat For Sale Leyton


London Help to BuyLondon Help To Buy

What is it?

A London Help to Buy equity loan could help you apply for a mortgage with a deposit as low as 5% - but it’s only available on new-build properties.

The government will lend you up to 40% of the property price, so with a minimum 5% deposit you’ll need a 55% mortgage to make up the rest. You will not be charged any interest on the 40% loan for the first 5 years of owning your home, however, a management fee of £1 a month will be applicable from the date of purchase. From year 6, a fee of 1.75% is payable on the equity loan, which rises annually by RPI  inflation plus 1%.

Who qualifies?

  • You need to have a deposit of at least 5% of the property’s value
  • You need to be looking to buy a home worth £600,000 or less in London
  • You need to be purchasing a property you intend to live full time (i.e. not a property you are going to rent out)
  • You’re buying a new-build property

Who doesn’t?

  • You can’t use a London Help to Buy equity loan if you own another property

When is it available until?

The scheme is expected to run until 2021. The equity loan is available for a maximum of 25 years or before if the property is sold or the mortgage is redeemed, whichever is first.

How to apply?

You will need to purchase a property through a house builder who is registered for the Help to Buy scheme, and therefore you will need to approach the house builder direct.

Once you have reserved a property, you can apply online and attach your reservation form, or you can download the Property Information Form which you must complete in full and email in along with your reservation for the property. 

Aldermore, Bank of Scotland, Barclays, Halifax, Leeds, Lloyds, Nationwide, NatWest, Newcastle, Royal Bank of Scotland, Santander, Teachers and TSB offer London Help to Buy.


Lifetime ISA (LISA)

What is it?

Potentially £1,000 of annual free cash! Any adult aged under 40 can open a Lifetime ISA and save up to £4,000 per year until they turn 50, receiving a 25% bonus each tax year on everything put in.

So if you save £1,500, you'll have £1,875 and if you save the full £4,000, you'll have £5,000 - £1,000 of free cash each year.

Any savings can be withdrawn, free of charge, to purchase your first home, or after the age of 60. If you plan to use the money to buy a house, the value of the property cannot exceed £450,000.

The downside? If you decide to take the money out of your ISA without buying a property or before you’re 60, you’ll lose the entire bonus paid to you on the amount you withdraw and there’s a 5% exit charge.

Who qualifies?

  • Anyone aged 18 to 39 can open a LISA
  • You must be resident in the UK
  • You need to have had the LISA open for at least 12 months to get the bonus cash for your first home
  • If you're planning on buying a home with your partner, you need to open two separate LISA accounts

Who doesn’t?

  • Anyone who has owned a property anywhere in the world before. This includes owning a share of a property that you inherited, even if you didn't live there
  • Anyone 40 or over - sorry!

How to apply?

So far, there are not many providers offering a LISA, as most of the major banks are still reviewing the new rules and regulations. The lenders that do are: Hargreaves Lansdown, Nutmeg and the Share Centre.


2 bedrooms, 1 bathroom | Halley Road, Manor Park, E12

£264,995 (Leasehold)

Flat For Sale Manor Park


1 bedroom, 1 bathroom | Glenarm Road, Hackney, E5

£375,000 (Leasehold)

Flat For Sale Hackney


2 bedrooms, 1 bathroom | Nelsons Row, Clapham, SW4

£450,000 (Leasehold)

Flat For Sale Clapham

 


Buying With Friends

Over the last few years, more and more high street lenders have started to offer group mortgages to keep up with the evolving housing market.

Recent research from Furniture Choice found that over a third of people of the UK are thinking about buying a house with friends (38%), with the biggest motives being unable to afford a property by themselves (54%), as well as not having a partner to buy with (42%).

With joint or group mortgages, you can usually borrow a lot more because your combined income will be higher than your income alone. Everyone named on the mortgage will be responsible for making repayments, but you are free to decide between you how you share the equity in the property.

It’s super important that you define your rights and responsibilities with a joint mortgage, as all borrowers will be ‘jointly and severally’ liable. This means that if one of you stops paying your part of the mortgage the other (or others) will have to pay the full amount.

Who qualifies?

  • Joint mortgages are for two to four people who want to own a property together, (you don’t have to all live at the address)
  • The property can be held as (i) joint tenants, where there are no definable shares or as (ii) tenants in common, where you both have defined shares. If the share is not specified, then the presumption is the property is owned in equal shares

How to apply?

We’d advise talking to a mortgage adviser before applying for a group mortgage. Big lenders Barclays and HSBC both offer joint mortgages.


2 bedrooms, 1 bathroom | The Chequers, Buckhurst Hill, IG9

£395,000 (Share of Freehold)

Lifetime ISA


We advise you to seek independent financial advice before making any big decisions. But if you need any property related advice, please don’t hesitate to get in touch on 0207 099 4000. Click here for an instant property valuation!


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