30 Oct

Help to Buy: Can the govt's new plan help you?

Help to Buy: Can the govt's new plan help you?

With recent reports that the property market is starting to make a recovery, many people could finally be ready to buy again.

Add into the equation the government’s new Help to Buy scheme and it seems now could be an opportune time for first-time buyers to venture into the market.

However, before you cancel your lease and start house hunting it may be a good idea to get to grips with the new housing policy.

As a first-time buyer, the scheme is designed to help you get onto the property ladder but first it's wise to know what the plan can actually offer you.

Help to Buy is split into four groups and each one is slightly different. By understanding each group you can determine which one is the most beneficial to your situation.

Equity loan

One option available is the Help to Buy equity loan. These loans are for first-time buyers or home movers on new-build homes that have a value of up to £600,000.

By using the Help to Buy equity loan you will be required to pay at least five per cent of the property's price as your deposit. The government will then loan you up to 20 per cent of the rest of the price. For the remaining cost you will need a mortgage of up to 75 per cent.

You will not have to pay any interest on the loan for the first five years that you own the house. From the sixth year you will be required to pay fees of 1.75 per cent on the loan's initial value.

NewBuy

Another option is the NewBuy scheme. This allows first-time buyers to purchase newly built homes with a five per cent deposit on the house price.

The home must be a new build, have a value price of £500,000 or less and must be your main home.

In order for the home to be be eligible, the builder must be taking part in the scheme.

Shared ownership

If you are a first-time buyer and your combined household income is £60,000 a year or less you can apply for the shared ownership scheme. Buyers using this scheme can purchase a share of their home and pay rent on the rest.

Initial purchases can be between 25 and 75 per cent with the option to buy more shares at any point.

Help to Buy mortgage

The Help to Buy mortgage scheme can help you to buy a property with a deposit of just five per cent.

In order to apply for the Help to Buy mortgage scheme you must meet the following eligibility criteria.

• You must intend to live in your house and not rent it out - this means it must be for a residential mortgage.

• The mortgage can only be taken out on a repayment basis and the price of the house must be £600,000 or under.

• As the scheme is designed to help first-time buyers, this property must be your only property anywhere in the world. It must also be located within the UK.

• Any home you want to buy must not be a shared equity or shared ownership purchase. This option is not restricted to first-time buyers and you can apply through the mortgage providers NatWest, RBS, Bank of Scotland or Halifax.

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