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What’s new for first-time buyers in 2018?

22 February 2018

Buying a home can be a minefield of decisions, jargon and fees – especially for the first-time buyer. And with housing high on the political agenda, keeping up with new policies is a must for anyone interested in buying their first home. If you’re looking to jump on the property ladder this year, here are the main changes to be aware of, because they may affect you.

New homes

The government has committed to creating 300,000 new homes every year for the next ten years. But around 40% of local planning authorities don’t have an updated development plan that matches the local projected growth in households. As a result, the government has said every area will now need to produce updated plans every five years. This, it says, will ensure enough new land is freed up for new homes to be built in high-demand areas of the country.

More than 200,000 new homes were built in 2017, so there’s still a long way to go before we start seeing any discernible differences. But it could start to have some affect on the number of homes on the market in the area you’re looking to buy.

Stamp duty land tax

In the 2017 autumn budget, the chancellor announced that first-time buyers purchasing a property for £300,000 or less will be exempt from Stamp Duty Land Tax. And when the purchase price is over £300,000 but under £500,000, buyers will only pay 5% on the amount above £300,000.

This relief only applies to properties purchased in England, Northern Ireland and Wales, up to a maximum purchase price of £500,000. If the purchase price is over £500,000, normal rates of Stamp Duty will apply to the whole transaction.

A first-time buyer is defined as someone who has never owned an interest in a residential property (in the UK or elsewhere) and intends to occupy the property as their main residence. It does not apply to anyone who is intending to buy their first residential property to then let it out to someone else.

Help to buy

The government’s Help to Buy scheme provides assistance to those getting on the property ladder.

Launched in 2013 and available until 2020, Help to Buy is essentially an equity loan scheme. It means that buyers only need to raise a 5% deposit. The government will then provide a further loan of up to 20%, interest free for five years. With a combined deposit of up to 25%, buyers have access to a wider range of mortgage at more attractive rates.

So far, the Help to Buy scheme has enabled more than 300,000 first-time buyers buy a property since launching. 

The downsides are that the government’s equity loan increases alongside the value of the property. So if you don’t pay back the loan in advance, the government will reclaim it when you sell the property – by which time its stake could be worth considerably more than the original loan amount. 

After year five, the loan will also start accruing interest. Although interest rates are currently low, it could still represent a significant and growing pile of debt. Help to Buy is also limited to new-build homes, which restricts your choice, and there have been accusations that developers are artificially inflating the prices of new-build homes that are eligible for the scheme, compared to similar properties nearby.

Some commentators suggest that first-time buyers may be better off in the long term by saving up for their own 10% deposit, which should be enough to access a competitive range of mortgages.

Using a conveyancing solicitor 

Using your own reputable, independent and impartial conveyancing solicitor, like Lyons Wilson, rather than an estate agent, has several benefits. Buying a home means parting with a considerable amount of money – and it’s important you utilise experts as much as possible during the process, especially as a first-time buyer.

Conveyancing solicitors know local areas very well and they’re trained experts, meaning they know all of the ins and outs of the legal side of buying a property. And they’ll act on your behalf through the entire process, taking away a lot of the stress often associated with buying a home for the first time.

To find out how Lyons Wilson Solicitors in Manchester could help smooth your first property transaction, simply fill in the ‘call-back’ form or call us on 0161 830 7756 for a free, no obligation consultation

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