London’s first-time buyers more than £65,000 better off than renters

We are always championing first-time buyers at London Money. So, we’re delighted that a report from Halifax shows that homeowners in London could be set to save £2,191 per year, compared to renters.

Over the course of a 30-year mortgage, that’s a saving of £65,730.

Joining the ranks

How do you get to a point where owning your home is cheaper than renting?

Unfortunately, the savings are unlikely to be felt immediately, as buying your first home brings additional costs and can require years of saving, just to have enough deposit.

But there are a few things you can do to speed up the process:

1. Save efficiently

Where you keep your money while saving for a deposit will go some way toward dictating how quickly you reach your goal.

A Lifetime ISA (Individual Savings Account) can be opened by anyone aged 18 to 39, with a contribution limit of £4,000 per year. Each time you put money in, it will attract a 25% government bonus for a maximum of £1,000 per year. Which is essentially free money that you can put toward your deposit.

However, if you make a withdrawal for any reason other than a mortgage deposit or to be used as retirement income after your 60th birthday, you will lose 25% of the amount you remove.

2. Review your credit score

Your credit score plays a big part in determining the mortgage you will be able to access, or if you can get one at all.

To improve and maintain your credit score, you should:

  • Pay bills on time and in full
  • Stay on top of credit repayments
  • Check your credit file and report any inaccurate data
  • Make sure your electoral register entry is up to date

Whilst boosting your credit score won’t help you to earn more money, it will mean that you have access to lower mortgage interest rates.

3. Consider helpful schemes

In London, there are a range of plans and schemes designed to help you to buy your first home. These include:

Help to Buy Equity Loan: This government-backed scheme aims to reduce the pressure surrounding saving to buy a home. The programme offers a 20% home equity loan and requires you to have a 5% deposit available.

Shared Ownership: This allows you to purchase between 25% and 75% of your first home, whilst paying rent on the rest. You can buy more of the property when able and can work toward fully owning your home.

Low deposit mortgages: Some lenders offer mortgages which require as little as 5%, while others offer 100% of the house price. However, these usually require a close relative to help, often in the form of a secured loan on their property, a deposit or guarantor.

Starter Homes Scheme: Although introduced in 2014, the first set of starter homes are set to be built this year. These properties will be available for first-time buyers at a 20% discounted rate.

Whilst these homes are not yet ready, it is worth keeping an eye on the progress of this scheme if you will be waiting to buy anyway.

4. Ask family for help

If your parents or grandparents are willing to help you get onto the property ladder, it may be wise to take their help. Whether that is in the form of cash to put toward the purchase, or an amount which can be used as security for a low deposit mortgage.

According to the Homeowners Alliance, parents and grandparents foot the bill for a quarter of first-time buyers. If you are a grandparent, or parent, thinking about helping younger generations to get onto the housing ladder, there are five things we want you to think about.

For more information and advice, our First-time Buyers guide includes everything you need to know about getting your foot on the property ladder.

However, if you’d rather talk to us in person, feel free to get in touch with us on 0207 808 4120.