 | This article needs to be updated.(February 2016) |
A first-time buyer (FTB) is a potential house buyer who has not previously purchased a residential property. [1] The term is used in the British, Irish, Canada property markets, and in other countries. In the US, the term first-time home buyer is common.
A first-time buyer is usually desirable to a seller as they do not have to sell a property, and as such will not involve a housing chain. [2]
In the US, first-time buyers are usually in their mid-30s. [3] [4]
There are many factors a first-time buyer may need to consider before purchasing their first property; how much initial cash they will need for stamp duty and any solicitors fees, and if they need to arrange a mortgage how much are they able to afford.[ citation needed ]
In many countries such as United Kingdom, Canada and Australia home ownership is seen as a natural step in the life cycle and the natural form of property tenure. [5] [6] Canada and Australia have some of the most ownership rate in word (all above 65%) home ownership. Ireland has one of the highest proportions of owner-occupiers in the EU at around 80%. [7]
In the UK in the 1980s almost half of all mortgages were taken out by first-time buyers.[ citation needed ] As of 2021, first-time buyers represented 50% of all mortgage house purchases in the UK. [8] In Ireland, FTB's represent 34% of the market.
The number of new buyers purchasing property declines when housing becomes unaffordable. [9]
In the 2007 Scottish parliamentary election the Scottish National Party proposed a £2,000 grant for first-time buyers to help them get onto the property ladder. [10]
Grants have not been forthcoming in the rest of the UK, but in July 2007 Housing Minister Yvette Cooper announced it would be broadening the government's Homebuy Shared Equity scheme to help buyers. "Unless we act now by 2026 first-time buyers will find average house prices are ten times their salary. That could lead to real social inequality and injustice," Cooper told Parliament. [11]
Since then, first time buyers have regained momentum in the market, with reports[ clarification needed ] in 2010 citing first-time buying as the most popular of consumer enquiries for a local, whole of market mortgage adviser - accounting for 37% of total enquiries. [12]
In 2016 the UK Government launched the Help to Buy ISA for first time buyers through incentivising them to use savings to fund a deposit on a property. The money saved is then boosted by 25% up to a maximum of £3000. [13] In April 2017, the Lifetime ISA was launched. [14] It was launched to replace the Help to Buy ISA (which was closed in Nov 2019). [15] The Lifetime ISA gives a similar 25% top-up from the government towards a First Time Buyer's home purchase, but also gives the flexibility to save the money and the top-up for retirement. [16] The First Homes Scheme was launched in June 2021, which enabled first-time buyers, local people and key workers to purchase a property at a discounted rate. [17]
The UK Help to Buy equity loan scheme closed to new applicants on 31 October 2022. [18]
In May 2023, first-time buyer mortgage approvals in Ireland reached their highest levels since 2011, according to the Banking and Payments Federation of Ireland (BPFI). [19]
An individual savings account is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax income, then the account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme.
An interest-only loan is a loan in which the borrower pays only the interest for some or all of the term, with the principal balance unchanged during the interest-only period. At the end of the interest-only term the borrower must renegotiate another interest-only mortgage, pay the principal, or, if previously agreed, convert the loan to a principal-and-interest payment (amortizing) loan at the borrower's option.
A bridge loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years pending the arrangement of larger or longer-term financing. It is usually called a bridging loan in the United Kingdom, also known as a "caveat loan," and also known in some applications as a swing loan. In South African usage, the term bridging finance is more common, but is used in a more restricted sense than is common elsewhere.
A Lease-Purchase Contract, also known as a lease purchase agreement or rent-to-own agreement, allows consumers to obtain durable goods or rent-to-own real estate without entering into a standard credit contract. It is a shortened name for a lease with option to purchase contract. For real estate, a lease purchase contract combines elements of a traditional rental agreement with an exclusive right of first refusal option for later purchase of the home.
Canada Mortgage and Housing Corporation is Canada's federal crown corporation responsible for administering the National Housing Act, with the mandate to improve housing by living conditions in the country.
Stamp duty in the United Kingdom is a form of tax charged on legal instruments, and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no longer require a physical stamp.
Equity sharing is another name for shared ownership or co-ownership. It takes one property, more than one owner, and blends them to maximize profit and tax deductions. Typically, the parties find a home and buy it together as co-owners, but sometimes they join to co-own a property one of them already owns. At the end of an agreed term, they buy one another out or sell the property and split the equity. In England, equity sharing and shared ownership are not the same thing.
A real-estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom. A land boom is a rapid increase in the market price of real property such as housing until they reach unsustainable levels and then declines. This period, during the run-up to the crash, is also known as froth. The questions of whether real estate bubbles can be identified and prevented, and whether they have broader macroeconomic significance, are answered differently by schools of economic thought, as detailed below.
The Right to Buy scheme is a policy in the United Kingdom, with the exception of Scotland since 1 August 2016 and Wales from 26 January 2019, which gives secure tenants of councils and some housing associations the legal right to buy, at a large discount, the council house they are living in. There is also a Right to Acquire for assured tenants of housing association dwellings built with public subsidy after 1997, at a smaller discount. By 1997, over 1,700,000 dwellings in the UK had been sold under the scheme since its introduction in 1980, with the scheme being cited as one of the major factors in the drastic reduction in the amount of social housing in the UK, which has fallen from nearly 6.5 million units in 1979 to roughly 2 million units in 2017, while also being credited as the main driver of the 15% rise in home ownership, which rose from 55% of householders in 1979 to a peak of 71% in 2003; this figure has declined in England since the late 2000s to 63% in 2017.
In finance, flipping is a term used to describe purchasing an asset and quickly reselling it for profit.
Buy-to-let is a British phrase referring to the purchase of a property specifically to let out, that is to rent it out. A buy-to-let mortgage is a mortgage loan specifically designed for this purpose. Buy-to-let properties are usually residential but the term also encompasses student property investments and hotel room investments.
This article gives descriptions of mortgage terminology in the United Kingdom.
In the United States, a mortgage note is a promissory note secured by a specified mortgage loan.
A mortgage loan or simply mortgage, in civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can also be described as "a borrower giving consideration in the form of a collateral for a benefit (loan)".
Places for People (PfP) is a property management, development, regeneration and leisure company based in the United Kingdom. On 20 March 2024, it was announced that it had completed the merger of its operations with those of South Devon Rural (SDR).
A foreclosure rescue scheme is a scam that targets those whose house is facing potential foreclosure. The scheme preys on desperate homeowners whose mortgages are in default by offering to prevent the foreclosure. There are various ways in which foreclosure rescue schemes work, causing different types of harm to the homeowners, but all ultimately with the likely end result of the owner being forced out of his/her home and losing even more money.
Help to Buy is the name of a government programme in the United Kingdom that aims to help first time buyers, and those looking to move home, purchase residential property. It was announced in Chancellor of the Exchequer George Osborne's 2013 budget speech, and was described as "the biggest government intervention in the housing market since the Right to Buy scheme" of the 1980s. It is an extension of a previous programme called FirstBuy that was aimed solely at first-time buyers. Help to Buy has itself been expanded and extended.
Unison Home Ownership Investors is an American home ownership investment company based in San Francisco, California. The company uses a shared ownership model to allow customers to buy a home when they don't have enough capital to get a normal mortgage taking a percentage of the gain when the house is sold. The company also provides reverse mortgages for people to release funds out of an existing real estate asset taking a share of capital gain. The funding is provided by institutional investors such as pension funds.
The Canadian property bubble refers to a significant rise in Canadian real estate prices from 2002 to present which some observers have called a real estate bubble. The Dallas Federal Reserve rated Canadian real estate as "exuberant" beginning in 2003. From 2003 to 2018, Canada saw an increase in home and property prices of up to 337% in some cities. In 2016, the OECD warned that Canada's financial stability was at risk due to elevated housing prices, investment and household debt. By 2018, home-owning costs were above 1990 levels when Canada saw its last housing bubble burst. Bloomberg Economics ranked Canada as the second largest housing bubble across the OECD in 2019 and 2021. Toronto scored the highest in the world in Swiss bank UBS' real estate bubble index in 2022, with Vancouver also scoring among the 10 riskiest cities in the world. The Royal Bank of Canada analysis showed that Canadian housing had become the least affordable that it had ever been. By 2023 Canada’s nonfinancial debt exceeded 300% of GDP and household debt surpassed 100% of GDP, both higher than the levels seen in the United States before the 2008 global financial crisis. Canada's housing investment as a percentage of GDP ratio peaked at 8.9% in 2022, whereas the US at the peak of the housing bubble only reached 7% in 2006.
The First Home Scheme (FHS) is a shared equity scheme launched in Ireland on 7 July 2022. It aims to help individuals and households looking to purchase a property, by providing supplemental funding in the form of an equity share, to be used in addition to the deposit and mortgage, so that the potential homebuyer can afford the price of their home.