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EDITIOR - This article was written to be informative about the topic of Help To Buy schemes in the UK. Pacific Odyssey Loans does not provide any advice whatsoever in this particular market.
What are Help To Buy schemes?
With raising property prices and stricter mortgage application criteria it is not surprising that many consumers feel it is more difficult than ever to get a foot on the property ladder. Many of us are finding it increasingly difficult to make the transition from either our childhood home or rented property because of the associated costs of buying a house. Thankfully in more recent times there have been a number of Government backed schemes introduced, designed to assist those looking to buy their first home and doing so invest in their future. Whilst the ability to mortgage a property will, for most of us, rely on our ability to offer a sizable deposit, the Help to Buy schemes available are designed to assist consumers in getting to the point required to make that transition. Today we will be looking at the Help to Buy scheme in greater detail to gain understanding as to how it can help unlock the key to a consumers first home.
The terminology of Help to Buy has become a generalised term for any Government back scheme concerning the purchase of a property. Generally speaking the scheme itself is relatively new with Help to Buy first being introduced a few years ago in 2013. The main focus of the scheme was to assist consumers who had fears of making the property ladder due to the continued rise in the cost of buying. This, coupled with some globally difficult times in the economy, meant that mortgage providers, and the checks they made on potential borrowers, became more challenging and therefore difficult for first time buyers to succeed in obtaining a mortgage. Since the Help to Buy scheme was introduced there has been a number of options been made available to consumers, focusing on different ways in which first time buyers can be supported in their efforts to enter the property market. An example of which is the loan equity scheme, which was introduced by George Osbourne, and where the government offered a 20% loan, interest free for a period of five years, allowing a buyers to lift their 5% deposit to a 25% one. Another example is a mortgage guarantee scheme which, like other schemes, is designed to encourage banks to lend knowing there is government support for consumers if they run into repayment difficulties.
Focusing on the Help to Buy mortgage guarantee schemes, this was launched by the Government in 2013. The aim of this element of Help to Buy was to offer banks a guarantee against losses on up to 20 per cent of a property's value in instances where a customer puts down at least a 5 per cent deposit. The offer of this guarantee by the Government gave banks and building societies a greater level of security in offering mortgages of up to 95 per cent of the property value. The success of this particular element of Help to Buy has meant it is offered by a range of high-street providers, which has opened up choice and flexibility to consumers. Another positive of this particular scheme is that it is often available on most types of homes.
Another product designed to assist consumers reach the point of buying a first time home is the Help to Buy ISA. The Help to Buy ISA offers support from the Government when saving towards the deposit required for first time buyers. It works on the understanding that consumers save £200 every month and in return the government provides a 25 per cent bonus once the ISA is closed and used to fund a home deposit.
More recently the Help to Buy scheme has introduced an element dedicated to those first time buyers looking to buy in London. This latest addition to the scheme offers those looking to buy in the capital a 40% government equity loan, offered over a five-year interest free period. Previously under the Help to Buy scheme consumers could have benefited from a 20% equity loan but those in London can actually now double this equity to 40%. This scheme is applicable to new builds and therefore consumers will need to locate developers providing new houses under the scheme, and of course mortgage providers offering this specific Help to Buy scheme. However with the vast majority of major players within the market already on board, such as Barclays and Nationwide, there are some exciting opportunities which are now available via the Help to Buy scheme.