With a significant rise in housing prices and stagnating wages, getting onto the property ladder has proven out of reach for many UK residents. However, since the introduction of help to buy scheme in 2013, the government has now made it easier to own a property in England. The help to buy scheme, coupled with low loan interest rates, is a welcoming option not just for first-time buyers, but also for those who’ve been priced out of the market.
The Help To Buy Equity Loan is a similar scheme to the Help To Buy Mortgage that assists home owners with moving to a new property.
Help To Buy Equity Loan.
If you are already a home owner and looking to upgrade to a bigger property, then the help to buy equity loan can help you move, without having to come up with a large deposit. This means you only need to come up with a 5 per cent deposit and apply for a mortgage of up to 75-80 per cent of the property’s value. The government will contribute up to 20%.
One of the biggest benefits of opting for a help to buy mortgage is that you are not required to pay any mortgage fees for the first 5 years of owning your property. On the 6th year, you will be charged up to 1.75 per cent of the mortgage value, with this figure increasing every year thereafter. Keep in mind that you are free to sell your home at any time, but will have to repay the equity loan upon selling.
Who is eligible for a help to buy mortgage?
Although every lender has its own criteria on who can qualify for a help to buy mortgage, the following are some of the basic eligibility terms that every applicant should take note of.
• A minimum 5 per cent deposit of the property’s value
• The total value of the property you wish to buy cannot exceed £600,000
• First-time buyers will need to secure up to 75 per cent mortgage from a lending company, and existing home owners may need to secure up to 80 per cent mortgage, depending on the lender’s criteria.
• The applicant must have a clean credit history and earn sufficient income to be able to afford the mortgage repayments.
• The help to buy scheme is only offered to residents in England, although there are similar government-sponsored schemes in Scotland and Wales.
• Overseas buyers who don’t own a property in UK won’t be allowed to use this scheme.
Help To Buy Mortgage
There is also a 2nd phase of the help to buy scheme known as Help To Buy Mortgage Guarantee.
Rather than providing the home buyer with an equity loan, the government guarantees the lender’s money so there is less risk for the lender to offer a 95 per cent loan to the borrower. This scheme isn’t just available for first-time home buyers as home movers can also take advantage, as long as they don’t intend on keeping their other property. Once you have sold your residential home and have no more properties in your name, you can apply for a help to buy mortgage.
Please note that the Help To Buy Equity Loan Scheme is only available properties that are new build.
For more information on the Help To Buy Schemes talk to our mortgage advisers in Camberley and Basingstoke.