Six first-time buyer schemes where you only need a deposit as low as 1% as key program ends

2H0E6H3 Estate agent for sale signs on exterior walls in Bandon, West Cork, Ireland.

THE Help to Buy scheme for first-time buyers has officially come to an end – but there’s still support for aspiring homeowners.

The government-backed equity loan ended on March 31, but closed to new applicants even earlier.  

A handful of schemes can help first-time buyers get on the ladder

It allowed budding buyers to put down a deposit of just 5%.

You could get up to 20% of the value of your property – or 40% if you live in London – under the scheme.

Its end comes as a blow during the cost of living crisis, meaning saving for a deposit can be unachievable while bills are spiralling.

Anyone who feels they missed out and is struggling to save a deposit or afford a mortgage should take a look at some of the alternative initiatives designed to boost ownership.

For example, a new scheme, which launched early this year, lets buyers get on the ladder with a deposit as low as 1%.

All schemes have their pros and cons though so make sure to do your research before going for either of them.

Here are some of the schemes aiming to give first-time buyers a helping hand.

The Mortgage Guarantee Scheme

Buyers with a small deposit of 5% can use the government’s mortgage guarantee scheme to get a 95% loan-to-value (LTV) mortgage.

The initiative was originally due to finish at the end of 2022 but has been extended by another year.

You now have until December 31, 2023, to take advantage.

Under the scheme, the government covers some of a lender’s losses if a borrower defaults on the loan and the property is repossessed.

The backing gives banks more confidence to offer loans to those with small deposits.

First-time buyers can use the scheme as well as home movers – but the property you want to buy must be below £600,000.

Shared Ownership

If you are unable to save the deposit needed to buy a home or can’t afford the mortgage payments, Shared Ownership could be worth a closer look.

The government-backed scheme allows people to buy a portion of a property and pay rent to a landlord on the rest.

Buying a share of a property means the deposit and mortgage payments are smaller than if you were buying the whole lot.

However, you will need to be able to afford both the rent and the mortgage repayments.

You can buy more shares of the home when you are able to – a process known as staircasing – until you own the property outright.

Or if you want to move you can resell your share of the property.

For some Shared Ownership homes, you may have to show you have a job or links with the area where you want to buy.

You should also keep in mind that buying increasing shares in your home can be expensive.

Save to Buy

Property developer Fairview has launched Save to Buy to help those who otherwise could not afford to buy.

The scheme allows first-time buyers to save for their final deposit via fixed monthly payments while living in their new home.

You only need a 1% deposit to get started, then once you’ve saved the required amount, you can apply for a mortgage to buy your home.

Be aware that the offer is only available on limited plots in and around London at the moment.

It will run until December 2023.

Deposit boosters

The end of Help to Buy has prompted a flurry of private companies to offer a similar style equity loan.

Even, OnLadder, Proportunity and Ahuaz are some of the new firms that have cropped up.

As with Help to Buy, these firms will loan you around 20% of the purchase price to be used as a deposit on a property.

Usually, you will also need to contribute a deposit of at least 5%.

An equity loan means the company takes a percentage stake in the home and share any price gains when it comes to selling.

If the home’s value has fallen, the loan provider will also share the losses.

Not all mortgage lenders accept so-called deposit boosters, so your choice of loans may be limited.

And unlike Help to Buy some of these loans also charge interest or may increase the percentage stake over time, which needs to be taken into consideration.

The First Homes Scheme

First-time buyers can bag a home with a discount of up to 50% using this government scheme.

The home’s discount will stay with the property forever and you won’t be able to cash in on the saving when it comes to selling.

To access the scheme, you will need to have a deposit worth at least 5% of the discounted purchase price and earn less than £80,000 a year or £90,000 in London.

Local councils may also add further rules such as a local connection or reserving the properties for key workers only.

First Homes is usually offered on a small number of properties within new developments, so you will need to look for local builders advertising the scheme and apply through them.

Guarantor and family deposit mortgages

Mortgage lenders are trying to boost home ownership by finding more ways to allow family members to support hopeful buyers.

For example, Barclays’ Family Springboard Mortgage allows buyers to get a home without saving a deposit at all when a family member or friend puts up savings worth 10% of the purchase price.

The money is returned to the helper after five years as long as the mortgage payments are kept up.

Generation Home is another innovative lender that allows family members to boost deposits either as a loan or a gift.

And more lenders are offering deals known as Joint Borrower Sole Proprietor. Under these mortgages, the income of another person can be used to boost affordability.

The additional applicant is liable for the mortgage, but they do not own the home.

Getting family help requires a large degree of trust and it is a good idea to work out a plan of what would happen if the buyer struggles to repay the mortgage.