Following the credit crunch in 2008, the government proposed a plan to help the mortgage market get back up on its feet. Part of the plan included the introduction of the Help to Buy schemes.
Help to Buy schemes are quite self-explanatory, they are government-led schemes that Help you to Buy a property. There are limitations to each scheme and you’ll have to qualify for them first before you can take advantage of them.
Each scheme is different in its own way. Depending on your personal and financial situation, you may match for more than one scheme, however, you’ll probably only ever find one most beneficial for you.
If you’ve heard of Help to Buy, you’ve likely heard of the Equity Loan because it was one of the first schemes introduced to the UK after the financial crisis in 2008. If you are a First Time Buyer in Newcastle, then this scheme could be perfect for you.
To be able to access the Help to Buy Equity Loan scheme, you have to be a First Time Buyer and are buying a new-build property. You will also need a minimum of a 5% deposit.
For the Help to Buy Equity Loan, your deposit that you put down can be anywhere between 5%-20%. Then the government will top up this percentage to 25%. For example, if you put down a 5% deposit you’ll get a 20% equity loan. If you put down a 10% deposit you’ll get a 15% equity loan, etc.
The Equity Loan that the government lend you will have to be paid off eventually. For the first 5-years of your mortgage, the loan will be interest-free, then afterwards, it will rise to a rate of 1.75%. This means that you have an Equity Loan to pay off, on top of your 75% mortgage.
If you can afford to put down a deposit greater than 5% then it may be worth going down a mortgage route without the use of Help to Buy. Your Mortgage Advisor in Newcastle will run through all of your mortgage options and help you choose the most beneficial avenue for your situation.
Here is an example of a home with a £10,000, 5% deposit. As you can see, the Equity loan takes up a large percentage of the property’s value. The further into your mortgage that you get, you may be able to Remortgage to help pay off the equity loan. Your mortgage payments might go up, however, the government will own a lower percentage of the property. If you can do this within the first 5-years, you won’t receive any interest on the loan.
The Help to Buy Shared Ownership scheme is very different to the rest of the government schemes. The scheme allows applicants to own part of a property and then pay the rest back on rent.
For Shared Ownership, you will usually own between 25% and 75% of the property. In some cases, we’ve seen applicants being allowed to purchase as little as 10%. Whatever the percentage is that you don’t own, it will likely be owned by the housing association. The share that you own can be increased earlier. we usually find applicants wanting to do this once they have more money or have settled in.
Shared Ownership lets you pay your mortgage as well as rent. The way that this works is that you essentially pay 100% of the ground rent and service charge on the property. This is still the same, even if you only own a 25% share of the property.
After the success of the Help to Buy Equity Loan scheme, in 2014, the Help to Buy Armed Forces was introduced. Introducing this scheme created an even better way for Armed Forces personnel to get onto the property ladder, as the scheme is specifically targeted at them.
You have to qualify for the scheme first before you can access it. The requirements are as follows:
– You have to have completed the pre-requisite length of service
– You can also apply if you have at least 6 months of serving time left
– However, you can also get accepted if you fit into the right medical categories
– Your personal circumstances will also be considered
The scheme allows you to borrow up to 50% of your annual salary; the maximum that you can borrow being £25,000. If you want to learn more about the Armed Forces Helpt to Buy scheme, you should check on the government’s website. Alternatively, you get in touch with a Mortgage Broker in Newcastle like ourselves.
We’ve considered this more of a ‘bonus’ scheme because it isn’t a Help to Buy scheme it’s a government-led scheme. The scheme can be used for one of two, to buy your first home or to save for later in life. As a Mortgage Broker in Newcastle, we offer help and guidance to those looking to utilise this scheme to buy their first property. The video below explains how the scheme can help a First Time Buyer in Newcastle like you.
The Lifetime ISA (Independent Savings Account) is simply a savings account where your money grows tax-free. The total amount that you put in each year will be topped by the government up by an extra 25%. The maximum that you can put into the account each year is £4,000. This means that you get an extra £1,000 if you manage to save £4,000 each year.
If you want to withdraw your money, as long as you’ve had the ISA for a year, you can do so. However, if you take money from the account and don’t use it to purchase your first home, you’ll be charged a 25% withdrawal fee. Although, if you decide to use it on your first home, you won’t be charged a single penny.
Of course, you have to pass the scheme’s criteria before you can start your Lifetime ISA account. To find out more, feel free to check out the government’s Lifetime ISA page, or contact us at Newcastlemoneyman. We can’t wait to hear from you and help you through your process.