There are some great in-depth articles on the ins and outs of the new Government Help to Buy Scheme on the web, however, they are generally pretty heavy on confusing technical jargon.
We thought we’d take a moment to explain scheme in simple terms, ‘for dummies’ as it were. So here we give details of what the scheme entails, how it works, and whether it will help you get the mortgage you need.
What’s the purpose?
The new initiative is designed to help people be able to buy houses by reducing the deposit required to obtain a mortgage. This will, it’s hoped, mean more houses are sold, injecting life into the property market and giving people a better chance of owning their own home.
How does it work?
The scheme is split into four parts:
Equity Loans – This is where the Government will lend you up to 20% of the value of a new house worth £600,000 or less, as long as you put down at least an initial 5% deposit yourself.
Shared Ownership Schemes –You and your local Housing Association share ownership of your home. You buy a share of between 25% and 75% of you’re the purchase price, and pay rent on the remaining equity.
New Buy – This part of the scheme allows applicants to buy a newly built home, worth £500,000 or less, with a deposit of 5% of the purchase price.
Help to Buy Mortgage Guarantees – The mortgage lender is given a guarantee by the Government, and you’re able to buy a house giving a deposit of 5%, as long as you aren’t intending to rent it out.
Am I eligible?
Well that depends on which part of the scheme you want to apply for, but remember, the Government is trying to help people buy their own home, so it’s designed to help YOU, rather than speculators.
As long as the property you’re trying to by fits the criteria outlined earlier, you can apply. There are no restrictions on ‘who’ can apply, as long as you’re a British Citizen.
How do I apply?
Again, this depends on which type of loan you require. So here’s a list of where to apply for each:
Equity Loans – Contact your local Help to Buy agent and remember, you need to buy the home from a registered Help to Buy builder.
Shared Ownership Schemes – This is another one for your Help to Buy agent, from the area you want to live in.
New Buy – For this part of the scheme you’ll need to contact an approved mortgage lender who will check if you can repay the loan, and tell them you’d like to use the Government’s NewBuy scheme.
Help to Buy Mortgage Guarantees – Apply directly to Bank of Scotland, NatWest, RBS or Halifax who’ll check you’re able to repay the loan before lending it to you.
Will it work?
The scheme should succeed in helping those have the means to pay the mortgage repayments, but are struggling to raise a deposit.
Most high-street lenders have signed up to the scheme, so before long there should be a much better chance of people being finally able to buy their own homes. This time without the risk of irresponsible lending leading to an unsustainable boom in prices.
Is there a catch?
As mentioned above, there is a fear from some industry analysts, as well as MPs from Labour, that Help to Buy is only going to help already relatively well-off people move up the housing ladder, and will do nothing to tackle the existing shortage of affordable homes.
There’s a suggestion it won’t help people who currently can’t afford to cost of mortgage repayments and therefore can’t get a footing on the property ladder.
The author of this article, Nick Taylor, writes for Regency Estates, a Sales and Lettings Estate Agents in Bolton, Manchester who have over 30 years experience in the Property Industry.