Are you or your children looking to buy a property, and if so, have you heard about the Government’s ‘Help to Buy’ scheme?
Why has ‘Help to Buy’ been introduced?
The Government is aiming to encourage economic recovery by increasing home ownership and to stimulate the housing market with the ‘Help to Buy’ scheme.
How can ‘Help to Buy’ help me?
There are two ways in which the ‘Help to Buy’ equity loan scheme could assist you.
Firstly: If you are intending to buy a new-build property valued up to £600,000 in England as your home, the Government are offering low-interest loans for up to 20% of the property’s value (up to 40% in London.)
Unlike bank mortgages, the Help to Buy loan is interest free for the first 5 years. In the sixth year, interest is charged at 1.75% of the outstanding loan plus 1% each year. The annual 1.75% charge will increase each year in line with the rate of inflation.
Secondly: If you are intending to buy a property for £600,000 or less, the Government will provide a mortgage guarantee of up to 15% of the mortgage. This means you will need a reduced deposit rather than the 25% currently required by most lenders.
Who can apply?
To qualify for the loan or mortgage guarantee, you must be 18 or older and eligible for a mortgage from a reputable lender. You will need a deposit of at least 5% of the property’s value. The property being purchased must be your only residence.
The loan is only available for new-build properties.
The guarantee is available for all properties.
How can I apply?
New-build houses are sold by builders and developers, who will help you to apply for a Help to Buy loan. Registered developers and properties can be located through local Help to Buy agents.
Many lenders have indicated that they will be offering mortgages using the guarantee scheme. You will need to compare the different products and in particular the interest rates and set-up fees charged.
How is the scheme being funded?
Both schemes look attractive and may assist you in purchasing a property. However, the costs will ultimately be passed to those who pay interest on the loans or use the guarantee scheme. As ever… you need to read the small print!
Will you need a solicitor?
When buying any property, and particularly a new-build, it is important that you involve an experienced property solicitor who will help you understand the scheme and its implications for you.