Thu 10 Aug 2017
Sowerbys guide to the Help to Buy Scheme
You may have seen the Help to Buy Scheme promoted, particularly on new developments. The perception is that the scheme is available for 1st time buyers only, but if the property you are buying is less than £600,000, you may be entitled even if this is your 2nd or 3rd time of moving.
The issue many people have, is that they can afford a monthly repayment on a mortgage, but do not have the capital in place for the large deposit needed for buying a home or moving to your next size home.
There are 2 main options, the Help to Buy Equity Loan or the Help to Buy Mortgage Guarantee.
Help to Buy Equity Loan
As an example, if you find a house worth £200,000, under the Help to Buy Equity Loan you will need to find £10,000 as a deposit, then £150,000 as the mortgage loan and the remaining £40,000 is provided as a loan from the government, which is interest free for 5 years. *
Help to Buy Scheme Mortgage Guarantee.
Under this scheme, you again will need to find 5% of the house value as your deposit, and you then borrow the remaining 95%. 15% of this is provided by the government and will provide a guarantee to your mortgage lender. This gives banks & building societies peace of mind to lend larger mortgages at lower interest rates, but your monthly repayments will be more than the Help to Buy Equity Loan scheme as you are borrowing more.
When you apply for a mortgage under the Help to Buy Mortgage Guarantee Scheme, you will be subject to the same checks as you would with any other mortgage application, which means your credit score will have to meet the lender's requirements. You will also need to be able to prove that you can afford the mortgage repayments.
If you have any questions or would like to discuss this scheme further, please get in touch.
Sowerbys currently have a number of sites which are eligible for one of the above schemes. See below for full details.
Heath Farm, Holt
Butterfield Meadow, Hunstanton
Heathlands, Common Road, Snettisham
Plot 12 £379,995 including carpet, vinyl, integrated appliances and turf
Staithe Place, Wells-next-the-Sea
The Coach House, Plot 87 £279,995 including Stamp Duty and flooring
The Mallard, Plot 117 £279,995 including Stamp Duty and flooring
*Help to Buy Equity Loan
You will need to pay an initial £1 monthly management fee from the start of the £40,000 loan until it is fully repaid, then it is interest-free for the first five years. After that point, the Government will start charging you. In year six, you will have to start paying 1.75% of the original loan's value as interest. And this will climb every year in line with the Retail Price Index (a measure of inflation) plus 1%.
These interest fees are NOT counted towards capital repayments.
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