How we bought a MASSIVE £310,000 four-bed family house with just a £15.5k deposit07/22/2021
PAYROLL assistant Sophie Oldfield bought a £310,000 four-bed home in Derbyshire with a deposit of just £15,500 – we explain how.
Usually first-time buyers need a deposit of at least 10% – £31,000 in Sophie's case- to secure a mortgage for a new home.
The 26-year-old bought the massive family home with her IT assistant husband Joe Spencer, 25, using the government's Help to Buy equity loan scheme.
The scheme means you can get a loan of up to 20% – or 40% in London – of the value of your property, and put down just a 5% deposit for an eligible home.
Under the old scheme, anyone moving to a newly built home and using the Help to Buy Equity Loan scheme could buy properties worth up to £600,000.
But since April this year, price caps have been slapped on homes which vary depending on what area you buy in – and this means you can only buy a home in certain areas if it's under a specific value.
Keen to make the most of the old scheme and bag a pricier home, Sophie and Joe were in a race against time to beat this deadline.
If they missed it, they would only get a loan for a property worth up to £261,900 once the new rules came into force.
Luckily, they cashed in under the old Help to Buy scheme and bought a four-bed home in September last year.
What are the pros and cons of using the Help to Buy scheme?
THE current Help to Buy equity loan scheme sees the Government lend up to 20% – or 40% in London – of the value of your property.
You only need to put down just a 5% deposit for an eligible home – which are new-build properties.
So far, the scheme has helped 313,043 people get on the property ladder and dished out a whopping £18.9billion in loans.
The scheme was launched in 2013 to help low income Brits buy homes much easier.
Although the old Help to Buy scheme let you buy pricier properties anywhere in the UK worth up to £600,000, the new scheme has a lot of merits too.
Here's the pros and cons you should consider when applying for a Help to Buy Equity loan:
- You can become a homeowner much quicker: you only have to save up enough money for a 5% deposit, which is half of what you'd typically need to save normally.
- Cheaper mortgage rates: applying for a Help to Buy loan means you won't need to take out as big a mortgage as usual – and Money.co.uk says that as your loan to value ratio will be lower, you'll be offered a more competitive interest rate.
- You can pay off your loan in chunks: You can essentially buy out the government's stake in your home by buying chunks as big as 10% of your home's value, Money.co.uk adds.
- You have to pay interest on your loan after five years: the amount of interest you have to pay back on your loan rises by 2%, at least, each year.
- You can only buy a new-build home: Only these homes are eligible to buy through the Help to Buy scheme.
- Higher prices: New-builds can often cost more than a traditional property, and the scheme has come under fire in recent times for helping to push up house prices, leaving lower income Brits priced out of the market.
- You could be left in negative equity: This is when you owe more money on your mortgage than the value of the property, which as well as leaving you out of pocket, can in turn can make it difficult to sell or remortgage. Experts have previuosly warned that you could be at risk of this if you use the Help to Buy scheme.
The couple were lucky enough to get £2,000 from Joe's mum, which helped them raise money for a deposit much quicker.
We sat down with the couple to see how they did it for The Sun’s My First Home series.
Tell me about your home
It’s a four-bed detached house in South Derbyshire, and the master bedroom comes with an ensuite.
There’s also a family bathroom, a downstairs loo, a kitchen/diner area, a snug area and a separate living room.
For the time being, we’ve turned two of the spare bedrooms into an office and dressing room – but we’re looking to start a family in the future, so those rooms will be the kids' bedrooms.
We have three cats – Effie, Edgar and Eugene – so they’re making the most of our front and back gardens at the moment.
We have a garage, which we’ve turned into a gym, as Joe is into his fitness.
How much did you pay for it?
We knew we wanted to buy as big a house as possible as we’re looking to start a family in the future.
But we would never have been able to have afforded the four-bed house we have now if it wasn’t for the government’s Help to Buy scheme.
The current Help to Buy equity loan scheme sees the Government lend up to 20% – or 40% in London – of the value of your property.
The loan is interest-free for the first five years and you can get on the property ladder putting down just a 5% deposit for the total value of the property.
We bought our house for £310,000, which would have meant we would have had to put down at least £31,000 for a 10% deposit.
We would never have been able to save up that amount of money easily, so we decided to use the scheme to help us bag a big home.
Using the Help to Buy scheme meant that we only ended up putting down £15,500 – a 5% deposit – down for it.
We took out a mortgage of £232,500 over 30 years at a fixed-rate period of five years.
Then, we took out a Help to Buy equity loan of approximately £62,000 to stump up the rest of the money needed to secure our home.
Were there any complications?
Now, there are price caps on the homes eligible to buy through the Help to Buy scheme – but it wasn’t always like that.
Under the old scheme – before April 2021 – you could buy a house anywhere across England as long as it was valued at £600,000 or under.
But this changed earlier this year when the government introduced price caps on homes eligible for the scheme depending on which area you lived in.
This meant that we would only be able to buy a property in the East Midlands valued at £261,900 once the cap was put in.
But in Derbyshire, three bed houses start at around £280,000 and upwards – which meant we would not have been able to buy as big a house as we wanted once the changes rolled out.
We were desperate to take advantage of the old scheme, and bag a pricier home.
So it was a race against time to secure our dream home before the Help to Buy scheme changed in April this year.
So we were in a real rush to find a home and exchange on it as quickly as possible.
We thought we had secured the home of our dreams in April last year, when we reserved a £330,000 home in the West Midlands.
It was still being built, but we thought we’d exchange and move in over September 2020 – way before April 2021 when the new Help to Buy rules would come into force.
But after countless delays to our completion day, we decided to ditch the house two months later in June and start the whole house buying process again.
Because of Covid, the developer ran into lots of construction work problems – at the beginning of the pandemic, lots of building sites closed as Covid cases rose.
After a final talk with the developer in June, it sounded like it could be a tight squeeze to beat the April deadline in 2021 – so we had to pull out.
We were devastated, and really concerned that our dreams of buying a big family home were slipping through our fingers.
It meant that we panicked and bought the house we ended up buying just two days after the deal on the old house fell through.
We knew that homes were in really high demand – often coming off the market just days after being listed.
So we had to act quick to bag our current home.
How did you save for it?
We had hardly any savings at the end of 2019, when we decided to seriously start saving and get on the property ladder.
Me and Joe got married in 2018, and spent most of 2019 – and our money – taking holidays throughout the year.
We spent a couple of grand on six holidays.
It meant that we had to start stashing away as much cash as possible.
We didn’t want to move back in with our parents as we wanted our own space, so we couldn’t cut down on our monthly rent bill – which was £600 for a two bedroom terraced house in Warwickshire.
The Covid lockdown really helped us to save – we didn’t go on any holidays, saving us £2,000 each, putting a total of £4,000 back into our pockets.
The main way I managed to boost my money was by taking on an extra job at a local warehouse, helping to distribute packages for delivery between April to September.
I would work from home from 7am to 4:30pm doing my day job as a payroll assistant, and then pick up a couple of shifts at my local warehouse from 6pm to 10pm two to three days a week.
This helped me raise an extra £3,000 in five months.
In total, we saved around £13,000 in just eight months.
We were also given £2,000 from Joe’s mum, bumping our savings up even further.
How did you afford to furnish it?
Luckily we had a lot of stuff for the new home already because the house we were renting didn’t come with any furniture.
We kept all of our spare bedroom and master bedroom furniture including the beds and wardrobes, and our sofa.
But we sold all of our living room furniture, a dining table and a dressing table when we moved out and into the new home- which gave us a couple of hundred pounds to buy new bits.
However, we spread out the cost of buying new furniture to manage what we were spending – I’m still buying small bits of furniture we need for the house.
Our families also helped us out by buying us furniture as welcome gifts.
Joe’s mum got us kitchen bits, and we got vouchers from my parents and Joe’s dad and step mum saving us around £300 on buying homeware.
What’s your advice for first time buyers?
We had to hurry to ramp up our savings to beat the Help to Buy scheme changes coming in this year.
But putting yourself under a bit of pressure can help you boost your savings and keep to your savings goals.
It's always good to do your research on the house buying process – I've set up an Instagram account to let others know how we saved for our home.
Using the Help to Buy scheme also helped us bag the home of our dreams that we otherwise had no chance of paying for.
Some people might be put off paying interest on their repayments after five years – but you can always sell up and avoid paying these charges.
We’re wondering whether to sell it and use the profit we’re hoping to make on the house to put intoanother home five years down the line.
But I reckon we might end up staying put – we want a family home for the future, and we couldn’t be happier with our new house.
This is how a student nurse went from being "silly with money" to buying her first home in just two years.
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Here's a savvy saver used the 50-30-20 savings method to help save for a deposit for her £146,000 first home.
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