Help to Buy
Help to Buy is a government-backed initiative set up to help first time buyers and those looking to move up the property ladder. It is made up of two schemes. The Equity Loan scheme is available on new build properties and was introduced on 1st April 2013 and the Mortgage Guarantee scheme will be available on new build and existing properties from January 2014.
With a deposit of 5%, the Help to Buy Equity Loan scheme allows you to borrow an additional 20% of the purchase price of the property from the government. The loan is interest-free for the first 5 years and then in the 6th year, you’ll be charged a fee of 1.75% of the loan’s value. After this, the fee will increase each year by Retail Price Index plus 1%. To qualify for the scheme, Help to Buy properties must be priced below £600,000, be newly built and be with in England. This scheme is currently not available in Wales and Scotland
The Government Equity Loan scheme is only available from approved, participating house builders and on selected plots only. To be eligible you must be able to prove that you have savings to cover the deposit of 5%, legal fees, stamp duty and the costs of moving. You must also be purchasing a property costing £600,000 or less, have a good credit history and not be named on any other property.
Once you have identified a property you will need to contact your local Home Buy Agent to confirm eligibility. In the Preston area, this company is PlumLife (http://www.plumlife.co.uk/Contact%20Us/Pages/default.aspx). They will assess your circumstances and then issue you with a certificate confirming how much you are eligible for. This is shown to both the Lender and the Builder before the mortgage application goes ahead.
This scheme will be introduced in January 2014.
If you’re looking to buy any residential property (up to the value of £600,000) with an available deposit of 5%, the Help to Buy Mortgage Guarantee scheme could help you purchase your new home.
From January 2014, the Mortgage Guarantee scheme will aim to increase the availability of mortgages for buyers with small deposits. The Government will look to provide £12billion in guarantees, which could enable up to £130billion in higher loan-to-value mortgages. This scheme will be available to both first time buyers and existing home owners on both new build and previously owned properties up to £600,000 in value. As this is only due to be implemented from January 2014, further details will be provided by the Government nearer the time.
I can see the Mortgage Guarantee scheme being more beneficial to the property market than the Equity Loan version as this is available on pre-owned properties as well as new build ones. At the moment once a new build property had been purchased under the Equity Loan scheme, this is the end of the chain. With the new Mortgage Guarantee scheme this could create a chain of transactions, with some buyers using the scheme and others not. Which ever way these properties are bought, it will definitely create some activity within what has been a subdued housing market for many years.
I will keep you up to date with regular blogs as and when more details are released. However, if you would like any more information or would like to have a discussion to see if ‘Help to Buy’ could benefit you or any of your family members, please do not hesitate to contact me.