First-time buyers must weigh up their options

First-time buyers
Could first-time buyers gain a better deal on a new home?

The announcement of a new government-backed discount starter homes scene has left many would-be first-time buyers wondering whether it is best to take advantage of the current crop of ultra-competitive mortgage deals on offer or wait until the cut-price homes come on stream.

Prime Minister David Cameron recently announced a Conservative Party proposal to build more than 200,000 starter homes – if the Tories form a government after next month’s general election. First-time buyers under the age of 40 who live in England can already register to buy those new homes at a discount of up to 20% off the normal price.

The offer is part of a government initiative to encourage home ownership and construction on previously used brownfield land. As a result, the 20% discount will be paid for by waiving the fees homebuilders have to pay local authorities under so-called Section 106 agreements, amounting to at least £45,000 per home on brownfield sites.

The Conservatives say homes worth £250,000 outside London, or £450,000 in the capital, would be eligible for the scheme and that first-time buyers would have to repay the 20% price advantage if they sold their starter home within five years.

Therefore, one of the key factors behind any decision as to whether to register for the government’s new starter homes scheme will be how long you plan on living in your first property purchase.

Buying any property is a major financial commitment, and the majority of home purchasers plan to keep hold of it for the foreseeable future. But life can change very rapidly for anyone aged under 40, so if there is a possibility that you will not remain in your first property purchase for five years or more it may be better to consider alternative help for homebuyers.

Through its Help to Buy scheme, for example, the government will advance buyers up to 20% of the value of a property in the form of an equity loan.

While purchasers have to find a 5% deposit on the property and secure a mortgage to cover the other 75% of the cost of the home, the equity loan can be repaid within five years without incurring any interest. After that time, borrowers will be charged a fee calculated at 1.75% of the equity loan plus 1%.

It is also worth bearing in mind that the location of the homes being built under the latest starter homes scheme have yet to be finalised, so it may not be available in some areas.

But before first-time buyers take the plunge and start looking for a UK removal company to transfer their belongings, it is worth noting that all government-backed plans to build new homes are likely to include discounts for first-time buyers. In last year’s Budget, for example, Chancellor George Osborne outlined plans to create a garden city of about 15,000 new homes at Ebbsfleet in Kent.

And the £1bn Large Sites Infrastructure Programme – which considers areas for development – has already pumped investment into parts of Kent, Berkshire and Devon.

Another option for people renting a council or housing association property is shared ownership. This allows tenants to buy a share of between 25% and 75% of their home and pay rent on the remaining share.

This option is available to first-time buyer households that earn £60,000 a year or less (or £66,000 a year or less in London for a one or two-bed property, or £80,000 a year or less in London for a three-bed or more property).

Just as the options for first-time buyers are many and varied and require in-depth research to pinpoint your new home, the same level of preparation is needed to ensure your moving checklist is complete before the big day.