Mike Hall investigates 'Right to Buy' for Money Dashboard...
The Government's ‘Right to Buy' scheme is designed to make it easier for those living in homes provided by the local council or a housing association to buy the home they live in. Tenants in England, Wales or Northern Ireland who have stayed in their home over five years may qualify for large discounts on the purchase of their home.
However, this still leaves a large number of potential home owners without assistance. Those in private rented accommodation or living with their parents, for example, are not eligible. Do we all have a right to buy our homes?
Is it OK to just rent?
Not everyone who is able to buy a home ends up better off. Running a household can be expensive and there is no guarantee it will be profitable. The property market if difficult to predict, and if the value falls, you could end up owing more than your house is worth. So even if you sold it, you would still owe money to your lender.
However, if the value increases, you may be able to capitalise on this when you're able to move into a larger home, or give yourself a lump sum pay out if your circumstances change and you have to move out.
Advantages of Renting
- Renting is a temporary commitment. Most rental agreements last for at least six months, but after that you are free to move if you have changed your mind or changed circumstances. Buying is much more permanent, and changing your mind after only a few months could incur heavy costs.
- A renter is not liable for upkeep and maintenance of the property. Plumbing, electrical and boiler fees, etc. are a home owner's responsibility.
- While rent may increase periodically, as a tenant you are not at risk of losing out due to falling property values.
Advantages of Buying
- While mortgage payments tend to involve paying a lot of interest, each payment takes you closer to owning the property, so when you move out you will be able to sell it on.
- Rented properties often come with strict rules about what kind of decorating and renovating you are allowed to do. In some rented homes, you will be stuck with furniture and wall paint you did not choose. If you own a home, you have much more freedom to personalise your space, including major renovations as permissible by your planning regulations.
- Buying your first home is often described as getting on the property ladder. If your income increases, or you have paid of a significant amount of your mortgage already, you may be able to move into a bigger home and your new mortgage will pay off your old one.
Costs to Consider
As well as the deposit, and the monthly mortgage repayment, there are other costs to budget for when buying a home:
- Solicitor's fee and other legal costs
- Cost of house survey (ignoring this could lead to large repair bills later on)
- Stamp Duty Land Tax (or in Scotland, Land and Buildings Transaction Tax)
- Utility bills (gas, electric, broadband) if you're not already paying them
- Removal costs or van hire
- Furniture and lighting
Help to Buy (in Scotland)
An alternative to Right to Buy available in Scotland is the Help to Buy scheme. The scheme is open to a larger pool of first time buyers. The Scottish Government will provide an interest-free loan of up to 20% of the purchase price from some newly built properties. Other similar schemes with slightly different qualifying criteria are known as the New Supply Shared Equity and Open Market Shared Equity.
Another option for those struggling to afford the cost of buying home is a Shared Ownership scheme. These schemes are available to first time buyers, and former property owners who can no longer manage the costs. It allows you to buy between 25% and 75% of a property, making the total purchase price more reachable. This option is especially suited to over 55s or people with long term disabilities. Those that participate in the scheme will be given the option to buy the rest of their home at a later date.
How to Save Money to Buy Your Home
Whether there are Government schemes available to help you buy your home or not, it's important to save up enough to cover your deposit and additional fees. Money Dashboard is a personal finance management tool that allows you to monitor your bank accounts and transactions to make sure you regularly save an amount you can afford until you reach your savings goal.
About the author
Mike Hall is a media and marketing professional, specialising in video production and content marketing. From Edinburgh, Scotland, Mike now lives in Glasgow. He has experience is short film production, podacasting and Internet radio, as well as having worked with SMEs in the technology industry, and private clients as a web designer, and an IT and marketing consultant.