For some people, saving a deposit, securing a mortgage or finding the right home at the right price is such a struggle that they are priced out of the property market or are trapped in the home they currently own. If you’re in this situation, it is worth looking into the Government initiatives on offer and the house builder schemes available. In this guide we give you an introduction to the schemes available that are worth you reviewing…
Government Help to Buy Scheme
Around 120,000 properties have been bought using the government’s Help to Buy Scheme, with new-build homes making up around half of this number. There are two parts to this scheme:
With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home.
Equity loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000.
You won’t be able to sublet this home or enter a part exchange deal on your old home. You must not own any other property at the time you buy your new home with a Help to Buy: Equity Loan. Find out more here.
A Help to Buy equity loan can only be used to buy a new-build home, while Help to Buy mortgage guarantees are available on both new homes and older properties.
The Help to Buy: mortgage guarantee scheme works in exactly the same way as any other mortgage except that under the scheme the Government offers lenders the option to purchase a guarantee on mortgage loans.
Because of this support, lenders taking part are able to offer home buyers more high loan-to-value mortgages (80-95%).
You will still be fully responsible for your mortgage repayments. So if you have a 5% deposit, you will need to take out and pay back a 95% mortgage. Find out more here.
Starter Homes Initiative
As part of its Starter Homes Initiative, the government claims it will build 400,000 new homes, which will be sold at a 20% discount to first-time buyers under the age of 40. The discounted price for these homes should be priced no more than £250,000 outside London, and £450,000 in London.
The scheme isn’t live yet and it’s not been announced when the first homes will be built.
Using part exchange to buy new-build homes
Some house builders run part-exchange (PX) schemes, which allow buyers to purchase a new-build home and use their current property as part payment.
While part-exchange schemes remove the hassle of selling your home the traditional way, there are disadvantages.
Some developers will offer below the market value, so you should always have your own valuations done by local estate agents before agreeing to anything.
Also, the eligibility criteria can be strict – sometimes you’ll only be able to use part exchange to fund up to 70% of the purchase price of your new home. For example, if the developer offered £200,000 off the asking price in return for your current property, the price of the new-build home you were buying would need to be at least £285,000.