This week, the government will roll out the latest stage of their Help to Buy scheme – enabling more buyers source the money they need to get on or climb up the property ladder. The project is destined to help thousands of people across the UK – here are 10 interesting facts you may not have previously realised about Help to Buy.
Help to Buy is not just for first-time buyers
Help to Buy contains within it the Mortgage Guarantee Scheme, which is available to anyone as a residential repayment (not buy-to-let).
The Treasury will charge a 0.9% ‘commercial rate’ to the banks for insuring the loan
This charge is put in place as a European measure – preventing the scheme being ruled as ‘illegal state aid’.
Help to Buy is not just for new homes
There has been some confusion over which properties qualify – Help to Buy is available on any property up to £600,000. The Equity Loan Scheme, which is a separate arrangement, is for new builds only.
It’s likely larger deposits won’t qualify for Help to Buy
Help to Buy really only exists for people who can’t afford large deposits, and it’s therefore likely that if you can afford 10%, or even more, on a deposit, the government will be reluctant to assist.
The Government will provide an equity loan of up to 20% of the property’s value
This value is dependent on your circumstances, but as part of the scheme the Government is obliged to make up the difference in your deposit.
The mortgage itself is not affected
The Help to Buy scheme itself is concerned with the deposit and loan elements of purchasing a property only – the rest is made up by a standard, run of the mill mortgage through your chosen provider.
1/3 of all new home purchases this year are expected to be through Help to Buy
Of course, as with any of these schemes nobody knows the accuracy of projected success, but research by Santander suggests housing transactions could rocket to five times their current level.
Demand could outstrip supply
Britain is a small country with a relatively large population – there is a danger that Help to Buy could promote property purchase to such an extent that there is not enough housing, affordable or not, to go around.
There are two sides to Help To Buy
There are a few differences between the options available within Help To Buy. The mortgage guarantee and equity loan schemes have different factors and parameters – this infographic from Rightmove is an excellent checklist to help you choose which one is right for you.
Not all mortgage lenders are participating
Help to Buy doesn’t exist by default, and it’s important to remember that it’s up to the lenders whether or not they would like to participate. It’s predicted that many lenders will only sign up once the benefits and associated costs are more defined.
When purchasing a property within this scheme, many conventional rules still exist and you will still need to source a quality and trusted property solicitor. Here at Burt Brill & Cardens we have more than 100 years of experience as a property law solicitor – contact us today for more information and details of how we may be able to help you.
Read our article on Dangers for First Time Buyers.