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Help to Buy Scheme

Help to buy Scheme 5% Deposit

The much publicised ‘Help to Buy Scheme’ has arrived.

What exactly is it?

The Help to Buy scheme is designed to help people who can afford to have a mortgage but have not been able to afford to save thousands for a deposit. The Help to Buy gives them a life changing opportunity, to buy a property that previously they have not been able to do.

The scheme is open to Home Movers AND First time buyers. (Even if you have moved home five times, you can still use this scheme or currently have a property and looking to sell and buy).

The scheme allows you to buy a property with a 5% deposit. 15% of the loan will be interest free for the first five years of owning your home. In the 6th year, the interest will be 1.75% of the 15% part of the loan.

Mortgage lenders have begun to unveil mortgages which they will offer under the new Help-to-Buy scheme. Royal Bank of Scotland, NatWest and Halifax will start taking applications this week; with HSBC, Aldermore and Virgin Money joining later this year/ early 2014.

Importantly, it’s NOT just first time buyers, the mortgages will be available for both first time buyers and home movers looking to buy a property. The only restrictions (currently) are: Maximum property value is £600,000, Property must not be a shared ownership or shared equity purchase, Property cannot be a second home, Property cannot be rented out (buy-to-let).
With the purchaser only needing a 5% deposit and the Government’s loan guarantee this means they can access an 80% mortgage, which opens the door to more competitive lending rates and the dream of buying your own home.

Some critics (Including Labour, which introduced the failed Home Information Packs) say this scheme could create a housing bubble in the UK. Personally, I think this is utter rubbish. Northern Rock were offering 125% mortgages meaning you could obtain a mortgage for £150,000 and they would give you another £30,000 to go on holiday, buy a car etc etc, it was credit heaven, care free, easily available credit on tap. We are in a very different place today. In addition, there will be no interest only mortgages or offset mortgages. My opinion, if you can afford to take up the scheme and are accepted by the lenders, jump in with both feet. It will be cheaper than renting.

Not all mortgage seekers will be able to sign up, and those who do, will still have to go through “rigorous” affordability checks by their lender.

Lenders can sign up to the Help to Buy scheme and pay a fee to the government, which will provide a seven-year taxpayer guarantee covering 15% of the loan value. That guarantee can be called in if the borrower defaults. It is available for properties sold for up to £600,000 in the UK. The scheme is expected to continue for three years.

At CLIFFTONS, appointments are now available … Tel: 01202 789699

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Posted: 9th October 2013

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