If you want to buy a new home, the first part of the Help to Buy scheme announced in the budget could help, even if you aren’t a first-time buyer.
The new arrangements will help all would-be buyers who do not have a large deposit available, and will appeal to people who already own a home but want to move – perhaps in connection with a new job, or to buy a bigger property as their family has grown.
From the beginning of April, all homebuyers can now receive up to 20% of the price by way of equity loans, provided they can find a deposit of at least 5%, and otherwise qualify for the scheme. Buyers will therefore only need to borrow 75% of the purchase price from a mortgage lender.
The new arrangements will be available on new-build homes up to a maximum value of £600, 000.
Equity loans are interest-free for the first five years. After that, a fee of 1. 75% is payable, rising annually by the increase (if any) in the Retail Price Index plus 1%.
Equity loans differ from ordinary mortgages as they are linked to the value of the property, rather than the amount borrowed. The amount needed to pay off the loan will therefore increase if the property increases in value but will decrease if its value falls.
No repayments have to be made until the property is sold, but purchasers can make voluntary repayments before then of all or part of the loan, this is known as ‘staircasing’. (The minimum repayment is 10% of the market value at the time of payment. )
When the property is sold, the outstanding equity loan must be repaid out of the proceeds. If the value of the property has fallen since it was purchased, the amount repayable will fall in proportion.
In the next few weeks builders will be advertising properties for sale under the new scheme, and more details should become available. It is likely that developers will be offering part-exchange or similar packages to buyers who already own a property, as Help to Buy will now be available to them.
Anyone interested in buying a new home under Help to Buy should contact a Conveyancing Solicitor now for more detailed advice on how the scheme works. Fridaysmove can arrange a local Solicitor to make the legal side of moving home as painless as possible – get a quote now.
The qualifying criteria for applicants under the present scheme, and which will presumably apply to the new scheme, are as follows:
- Must be a qualifying buyer unable to afford a suitable home in their local market. Applicants must not be able to buy a home suitable for their housing needs within a reasonable travelling distance of their work place, without assistance.
- Must be able to demonstrate access to savings or sufficient funds to pay, if required, a deposit (which may be 5% or more of the purchase price), legal fees, stamp duty and other costs of moving.
- Must be able to sustain home ownership in the longer term. Typically, applicants will be employed on a permanent contract of employment (there are exceptions for key workers). If self-employed, the applicant must be able to provide accounts for the last three years.
- Must have a good credit history. If applicants have rent arrears during the last 12 months, are in breach of their current tenancy agreement or have an adverse credit history which means they are unlikely to be able to sustain ownership, they will not be eligible.
- Must take out a first mortgage with a qualifying lender.