Help­ing hands from Govern­ment or bank of mum and dad

Yorkshire Post - Property - - PROPERTY - Franz Muelthaler

The amount you pay will de­pend on the value of the prop­erty you are buy­ing.

Up to £125,001 …Rate 0 per cent; £125,001 – £250,000 …Rate 1 per cent; £250,001 – £500,000 … Rate 3 per cent; £500,001 – £1,000.000 … Rate 4 per cent; £1,000,001 or more … Rate 5 per cent. With ef­fect from 24/03/2010 (Bud­get 2010), the Govern­ment in­tro­duced a scheme where first time buy­ers won’t have to pay stamp duty on prop­er­ties up to £250,000 be­fore 24/03/2012. How­ever with lenders re­luc­tant to pro­vide higher LTV mort­gages and the prob­lem of get­ting a large de­posit has meant the re­sults are nowhere near as ef­fec­tive as hoped.

Whilst Stamp Duty will not have a di­rect im­pact on what you can bor­row, it is some­thing that needs to be con­sid­ered as a cost. If you are strug­gling to get a de­posit to­gether and have to set aside some of your sav­ings for costs, this can have an im­pact on your Loan to Value as you may have less of a de­posit than you thought.

This cen­tres on a new build in­dem­nity scheme which will al­low buy­ers to se­cure loans on newly-built homes with just a 5 per cent de­posit – with the Govern­ment and house builders help­ing to pro­vide se­cu­rity for the loans.

Af­ford­able hous­ing providers will also get £1.8bn in fund­ing to de­velop new homes. The first £1bn of con­tracts have al­ready been con­firmed, putting the Govern­ment on track to de­liver up to 170,000 new af­ford­able homes across the UK over the next four years. For ex­ist­ing builds that have stalled due to eco­nomic con­di­tions, a £400m ‘Get Bri­tain Build­ing’ fund­ing pot will en­able house builders to restart con­struc­tion, cre­at­ing up to 16,000 new homes on sites that al­ready have plan­ning per­mis­sion too.

Sup­port will also be of­fered to self–builders, with £30m additional fund­ing go­ing to sup­port pro­vi­sion of short–term project fi­nance on a re­payable ba­sis. How­ever the sourc­ing of these schemes and qual­i­fy­ing cri­te­ria can be very dif­fi­cult. So whilst ini­tia­tives are al­ways wel­come, the rules can be some­what less wel­com­ing.

It’s never been a bet­ter time to buy but iron­i­cally first–time buy­ers are rarely seen through es­tate agents doors with the UK hous­ing mar­ket hav­ing fallen to a three-year low.

But fi­nan­cial as­sis­tance from par­ents can be a big help and it doesn’t have to mean hand­ing over their life sav­ings!

A cash gift is nor­mally the most ob­vi­ous so­lu­tion but not nec­es­sar­ily the eas­i­est or pre­ferred op­tion for par­ents. There are op­tions that al­low par­ents to in­vest in a sav­ings ac­count with the mort­gage lender a sum of money equiv­a­lent to the de­posit re­quired. The lender then re­stricts any with­drawals from this ac­count un­til the first-time buy­ers can meet cer­tain cri­te­ria or can re–mort­gage to a dif­fer­ent lender at a later date. The par­ents get their money back and have helped se­cure own­er­ship of a prop­erty for their chil­dren.

An­other way is for a par­ent or par­ents to co–sign on a mort­gage ap­pli­ca­tion with their chil­dren, sim­i­lar to the per­cep­tion of a guar­an­tor. This will not re­quire any additional money for de­posit, thereby safe­guard­ing the par­ents own sav­ings, but does pro­vide additional se­cu­rity for the would–be lender.

There is of course qual­i­fy­ing cri­te­ria to be met for both the bor­rower and the par­ents, Dif­fer­ent lenders will have a dif­fer­ent ap­proach to this sce­nario and not ev­ery lender will of­fer this as an op­tion.

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