It goes without saying the Help to Buy scheme has been effective in getting buyers onto the property ladder, and can be a real lifeline for aspiring homeowners struggling to save a full deposit.
There is another side to this around clarity of the scheme which should be carefully considered when it comes to establishing the level of support needed from the equity loan. Getting into your finances doesn’t have to be daunting which is where a mortgage advisor comes in handy.
If you’re on the hunt for a new build home and considering Help to Buy, know the facts and what to be aware of before making a decision. Over to our New Build Director Phil McGuire for some top tips on how to stay ahead of the game…
• Launched in 2013 to help buyers in the UK get onto the property ladder, the scheme allows the purchase of a new build home with a 5 percent deposit with the Government lending up to 20 percent of the purchase price (up to 40 percent in some London boroughs).
• The scheme applies to new build homes only up to a purchase price of £600,000 anywhere in England. It’s available to first time buyers and home movers with some additional terms (available on the Help to Buy website).
• Buyers who qualify for the scheme can opt to take a lower percentage of equity loan to suit their circumstances.
• The equity loan is interest-free for the first 5 years, with a £1 per month admin fee payable during this period.
• The equity loan must be repaid on sale of the property or after 25 years (whichever comes first), with an interest rate which rises each year.
• Once fully repaid buyers will have paid back the same percentage borrowed but based on the price of the property at the time of sale or valuation if re-mortgaging, which could be higher or lower than the price of the property when the equity loan was taken out.
• The scheme can be used back-to-back if purchasing another new build home with a different housebuilder.
• The current scheme will run until 2021 when some changes will come into play, making the scheme available to first time buyers only with a price cap in place (see more information on the Help to Buy website).
The above refers to the English version of the scheme, which is different in Scotland and Wales.
What to be aware of:
• Take time to fully understand the scheme and if you really need to use it. You may find it difficult which is to be expected if it’s completely new to you, so don’t be afraid to enlist the support of a mortgage advisor who will get to know your financial circumstance and offer guidance.
• It’s really important to establish what percentage of equity loan you need based on your circumstance, as with any loan the higher percentage the more you are required to repay.
• Another thing to note is repayment of the equity loan and the terms around this – make sure you’re happy with them so there’s no surprises when payments are due.
• Look into the changes coming into play in 2021 and whether these will affect your home ownership plans in the future.
• If Help to Buy is a great option for you, it’s worth opening a Help to Buy ISA before the end of November 2019 when no new applications will be accepted. This special ISA sees the Government boost your new home savings by 25 percent of what you put in, so can help you save a deposit quicker.
We are experienced in Help to Buy so find your nearest North East branch here to arrange an appointment with one of our friendly advisors.