A DEVELOPER is flogging 100 homes for just £1 in a new help-to-buy scheme.
My Generation Group Ltd has launched the Help to Own scheme, where 100 properties in a new Wolverhampton complex could go under the hammer for a pound.
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Under the scheme, a portion of tenants’ monthly rent payments goes towards a Loyalty Premium, allowing them to buy their homes for £1 after 25 years.
If they leave within 20 years, their Loyalty Premium gets paid out in cash.
WV Living, a developer established by Wolverhampton Council, has made three and four-bed properties available under the Help to Own scheme.
The Marches Estate, its new £34 million residential complex, includes 100 homes up for grabs through the loyalty-premium system.
More than 250 homes are also available under a help-to-buy scheme.
My Generation Ltd said: “Help to Own lets you rent a quality new-build home for the long-term.
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“As you make your monthly payments you build up a Loyalty Premium, which you can take as cash if you leave the
scheme within 20 years.
“On your 25th anniversary you can buy your home for £1.”
The scheme was established specifically for people and families struggling to save a deposit to fulfil their dream of owning their own home.
It is also aimed at helping key workers get on the ladder with around four in 10 of the homes available being reserved specifically for key workers.
Andy Street, the West Midlands mayor, said: “This makes home ownership more accessible to people and that has got to be a good thing.
“Here, it is about local people, key workers moving into these new elegant homes and actually being able to, in time, own them.
“I think this scheme is needed more.
“People perhaps starting off in jobs will find it really hard to get on the housing ladder, and that gets more difficult as prices go up.
“This makes it more accessible. It is a good scheme, and I hope we can have more.”
What other schemes are available?
Here are a few other first-time buyer schemes you can take advantage of.
‘Mortgage-free’ offer
First-time buyers who reserve a new Persimmon home by January 31 can benefit from the company covering up to 10 of their monthly mortgage payments.
The mortgage-free incentive is capped at 5% of the agreed sale price.
For example, if your new home costs £245,000, Persimmon will pay up to £1,225 in your mortgage payments for 10 consecutive months.
This equates to an annual saving of £12,250.
The 5% discount is the maximum that a developer is allowed to contribute to a customer securing a mortgage – so if your house costs more than the average, it may not cover your whole monthly bill.
But be aware that the offer is available on selected developments and plots only.
The scheme is not open to those who purchase a property with a buy-to-let mortgage or those whose property was purchased using the First Homes Scheme or through a Discount Market Sale.
Mortgage guarantee scheme
The mortgage guarantee scheme helps households with 5% deposits purchase their homes.
It enables buyers to take out a mortgage worth 95% loan to value (LTV), meaning only a 5% deposit is needed.
Under the scheme, the Government guarantees part of borrowers’ home loans, reducing the risk on the loans.
It means that if the borrower is unable to pay one month, the state will pick up the bill – although it is highly likely there will still be repercussions for borrowers if this happens.
The scheme slashes the minimum amount first-time buyers need to purchase their first homes in half.
For example, a 10% deposit for a £300,00 home is £30,000 but under the programme, buyers would need just £15,000 for a deposit worth 5%.
The scheme runs for properties worth up to £600,000, which would see the minimum deposit required lowered from £60,000 to £30,000.
But while the scheme will help those struggling to scrape a deposit together, buyers will still need to earn a certain amount to be able to borrow a big enough mortgage.
Lenders will typically lend borrowers up to four or five times their salary.
So to buy a £600,000 house with a 5% deposit, you’d need to have a combined income of a minimum of £135,000 a year.
A major downside of these loans, however, is that the interest rates are often considerably higher than you’d pay with a higher LTV mortgage.
Shared ownership
Shared ownership lets first-time buyers purchase a portion of the equity in a property if they can’t afford to take out a mortgage for the total value of the home.
You’ll co-own your home with a housing association, which will charge you rent on its portion of the property.
Buyers will find they’ll likely need to buy a new-build home.
Buyers must purchase between 10% and 75% of the property to use the initiative, and they can then “staircase” – buy more shares in instalments – until they own 100% of it.
You can put down a deposit of just 5% using a shared ownership scheme.
While it can make buying a home more affordable, there are a few disadvantages.
You don’t have as much freedom when it comes to selling up – if you own less than 100%, your housing association will get a set period of time to find a buyer.
That means you won’t be able to accept a higher offer from someone else.
Or, you might have to sell it back to the housing association instead of putting it on the market.
There are also fewer lenders offering shared ownership mortgages compared with standard ones.
This means there isn’t much competition to offer decent rates.
Help to Build
The government last year unveiled its Help to Build scheme to first-time buyers.
It means you’re able to build your own home with just a 5% deposit.
The government can give you an equity loan based on the estimated costs to buy the plot of land and build your home.
The loan amount can be between 5% to 20%, and up to 40% in London.
It will make building your own home more affordable, as previously, you needed a deposit worth around 25% of land and building costs.
With a home costing £400,000 to build, you would need to raise £100,000 typically. At 5% this would be just £20,000.
But there are some downsides.
Building costs can often run away – which means you could go over budget and end up forking out much more than you want to.
It could also be challenging to find land to buy and build on – including the faff of getting planning and a mortgage.
Companies offering loans with 5% deposits
There are companies offering loans to first-time buyers with just 5% deposits to help them boost their home budget
If you have saved up enough for a 5% deposit, you can apply for a home loan from Proportunity.
It works in a similar way to Help to Buy – but the key differences are that you can get a loan to cover up to 25% of the total value of a property, and it doesn’t have to be a new build.
You can repay your loan at any point – for example, you could choose to pay it back at all once when you sell up.
Ahauz is another company offering equity loans to buyers with a 5% deposit.
Again, you can get up to 25% of the property value up to £150,000.
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