UK Government boosts property market with the ‘Help to Buy’ scheme
By guest blogger, Paul Trueman, Independent Mortgage Adviser – Anthony Trueman & Co Ltd
In April 2013 the government introduced the ‘Help to Buy’ scheme to help revive Britain’s property market. The scheme will run for 3 years and is intended to help first-time buyers and people who already own their own home to move house more easily.
However, since its launch a year ago the media has reported a great deal of controversy surrounding the scheme, asking if it really is helping the property market or instead simply inflating house prices and creating an artificial housing bubble.
Regardless of the view point, it is important any individual thinking of applying for the scheme gets good independent advice before embarking on any type of mortgage commitment.
What is Help to Buy?
So, what is Help to Buy and how does it work? Well, there are two main schemes available in the UK: equity loan and mortgage guarantees.
1) Equity loan – help to buy scheme
This loan is only available on new-build properties. The government will provide a couple or individual with an equity loan of up to 20% of the property price; the other 75% will need to be funded personally through a mortgage. The mortgage element will then be re-paid via monthly instalments from the individual. The equity loan element has no fee payable until the 6th year when a fee of 1.75% of the loan’s value is charged (you should be aware this will increase every year).
Paying back the equity loan
You must repay the equity loan when you come to the end of your mortgage term or sell your home. You can pay the loan back sooner without selling your house if you wish, providing the amount you pay back is worth at least 10% of the property’s value.
2) Mortgage guarantees –help to buy scheme
The other main scheme available is the mortgage guarantee scheme, which is available on both new-build and older homes in England, Northern Ireland, Scotland and Wales. The scheme is designed to help encourage more high-loan-to-value mortgages, meaning borrowers with smaller deposits can borrow up to 95% of the property value more easily. The government will act as guarantor for the loan, ensuring mortgage lenders can claim 80% of the property value back from the government if the worst should happen and the property is repossessed.
Neither of these schemes will affect the value of a property or it saleability in the future.
Common to both schemes:
• Both schemes are available to first-time buyers and home movers in the UK.
• The value of the home must not exceed £600,000.
• It must be your only property.
• The property can’t be rented out after purchase.
• All schemes require a minimum 5% of the property price as a deposit.
• The schemes are not available on interest only mortgages.
We can help you decide which scheme is right for you and ensure you get the best mortgage deal. Call us today, and one of our experienced advisers will be happy to help you.