Are you struggling to get a foot on the property ladder or perhaps have children facing the same issue? Help to Buy may be the answer but what exactly is it?
Help to Buy is a government backed mortgage scheme that was launched in 2013. It can only be used in conjunction with the purchase of a brand new property. We are of the opinion that it is a well constructed product and can help purchasers to buy a new build property when their income may ordinarily have not allowed them to do so. The scheme works for those who do not own any other property and is open to first time buyers and home movers (there is sometimes a misconception that it is only available to first time buyers). The government provides an interest free loan of 20% for 5 years (interest is charged on this loan after 5 years), the borrower is required to invest a 5% deposit and the remaining 75% is borrowed via a mortgage from a bank or building society.
The maximum purchase price is £600,000 and the product allows buyers to secure a property which they perhaps wouldn’t have been able to afford without government assistance. The interest rate is also competitive on the 75% loan to value mortgage as the bank/building society is in receipt of a deposit of 25% rather than say 5%, and therefore they treat the mortgage as being of lower risk and attracting a lower rate of interest. In addition, interest is being paid on a smaller loan (ie a 75% loan instead of say 95%) which reduces monthly costs even further. When the property is subsequently sold or after 25 years, the 20% owed to the government is repaid, although it is possible to repay the loan at any stage should the situation arise. Help to Buy London (only available for properties in London) is similar to the scheme above, but the maximum equity loan is increased from 20% to 40% to reflect London prices. We are able to access these schemes and advise on the best product for your circumstances. It can be a complex area and an early consultation with one of our independent mortgage experts is recommended.
Paul Hardingham and Tony Ibson are Mortgage and Protection Advisers at Innovate Mortgages and Loans. Both have over 20 years of experience advising individuals and businesses across the North East of England. They can be contacted for bespoke advice at paul@innovateml.co.uk or tony@innovateml.co.uk or call 0191 223 3514.
